Investment Commentary – August 2021

August 28, 2021

The economic recovery reached some important milestones recently. The S&P 500 has doubled its level from its pandemic low. This marks the fastest bull market doubling since World War II, taking just 354 trading days, a milestone that historically takes more than 1,000 trading days to reach. After growing at a 6.5% annual rate in the second quarter, real GDP is now 0.8% larger than it was at its previous peak just prior to the pandemic.

Of course, just getting back to where we were before the pandemic hit is a low bar to pass. Obviously, GDP would have grown much faster if the pandemic had not occurred, and the economy clearly still has some ways to go before it is fully pieced back together. Unfortunately, the pace of the recovery has already begun to slow. Second quarter GDP growth, despite being the fastest year-over-year pace in 70 years, missed expectations, with most estimates projecting growth between 8% and 10%. Corporate earnings were stellar in the second quarter, but the consensus among most analysts is that earnings growth has peaked. Retail sales decreased unexpectedly in July, and the most recent reading of the University of Michigan’s consumer sentiment index showed a dramatic plummet, with sentiment falling to the lowest level of the pandemic era.

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