• Onwards and upwards? The S&P500 has risen 14% year-to-date, putting it on course to achieve the second best January-through-June period since 1998. Historically, this bodes well for the stock market. In past years when the market has had this strong of a return in the first six months of the year, stocks finished the year higher 75% of the time. However, earnings growth is expected to slow, and Fed tapering and potential tax increases threaten to derail the market’s momentum. The increase of the short sellers positions from 2% of the SPDR S&P500 ETF stock outstanding at the start of the year to around 5% is an indication of sentiment in the market.
• On the Road Again: Car companies and consumers alike are starting to feel the effect of limited auto inventories. Transaction prices for automobiles are expected to rise 14.9% to $40,206, which is the highest on record. Despite this increase in prices, data is showing that consumers are buying more expensive cars even with fewer dealerships discounts. This may soon lead to higher profit margins for car manufacturers and retailers.
• The Fed's meds for the economy: Some investors have argued that the market’s current reliance on monetary support is misaligned with the actual issues that the economy faces. For example, monetary policy is often viewed as a means to spur demand in the economy. However, today’s problems seem to revolve around supply chain bottlenecks, shortages, backlogs, and a lack of workers, which are looked at as supply issues. As a result, some have argued that the monetary policy support needs to be stepped back. It seems The Bank of Mexico took this to heart raising interest rates last week, but it doesn't seem the Federal Reserve has similar notions.
• ESG evolves: At the end of 2019 roughly one-third of all assets under professional management were invested with some form of a sustainable-investment strategy or by institutions that filed shareholder resolutions on ESG issues. ESG investors have grown in numbers and priorities have changed. 42% of respondents in a recent Global Investor study stated that their attraction to ESG investing was based on achieving higher returns. This hope of higher returns exists despite the fact that the average annual expense ratio of sustainable ETFs that invest in US stocks is 0.33% versus 0.09% for the lowest cost US equity ETFs.