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Weekly Market Performance — Small Caps And Energy Power This Week’s Results

Index Performance

weekly performance

U.S. and International Equities

Major Markets Finish higher while International Markets Selloff

The major markets finished the week higher, with the Dow Jones Industrials leading the averages. Moreover, US small caps have been a leader for the last rolling one month time frame. LPL Research continues to be positive on small caps amid strong earnings growth prospects and rising earnings estimates, supporting valuations which appear reasonable. Emerging markets, as represented by the MSCI EM Index, continue to be the largest detractor on the back of increased risk of Chinese regulations and Evergrande default contagion fears.

Energy Powers Markets for a Second Straight Week

Energy stocks, which sold off earlier this summer, continued to move higher as concerns mount over lower than expected worldwide supply. Market concerns continue over China not having enough coal and natural gas despite the country’s energy stockpiling as rivals in North Asia and Europe compete for a finite supply. Other cyclical sectors, including materials, industrials, and especially financials outperformed the broader S&P 500 index this week, as the economy continued to show signs of expanding despite the Delta variant spread.

Fixed Income and Commodities Recap

Bonds Lower while Oil Propels

The bellwether Bloomberg Barclays Aggregate Bond Index finished lower and broke its streak of three consecutive higher weeks. Bond price declined as the 10-year Treasury yield followed last week’s increase to move higher again after the Federal Reserve’s (Fed) meeting Wednesday. Oil and Natural Gas were the only commodities this week to finish in the green amid worldwide supply concerns.

Economic Weekly Roundup

Fed Talk

The major economic news this week was the conclusion of the Fed’s two-day Federal Open Market Committee (FOMC) meeting on Wednesday. As expected, there were no changes to current interest rate or bond purchasing policies. However, the Fed continued to prepare the market for a reduction (tapering) of bond purchases.

Supply chain bottlenecks, which we have seen affecting the economic landscape since the beginning of this year, along with the Delta variant have played a vital role in shaping how the Fed views inflation as well as GDP growth for the remainder of 2021.

The Fed reduced its GDP expectations in 2021 from 7% to 5.9%. In addition, the Fed expects higher inflation with personal consumption expenditure (PCE) headline and core metrics at 4.2% and 3.7%, up from 3.4% and 3.0%, respectively, in June. However, the Committee sees inflation falling slightly in 2022 and raised its economic growth forecast for the year as well.

Other highlights from this week’s economic calendar included:

  • Initial claims for unemployment insurance increased more than economists expected to over 350K for the week ended September 18.
  • Continuing claims also missed expectations, increasing 245K from the prior week to over 2.8 million.
  • Leading indicators for August from the Organization of Co-operation and Development (OECD) signaled moderating global growth ahead. Among major countries, Brazil saw a month-over-month decline, while Europe’s growth outlook has improved the most over the past six months.

The following economic data is slated to be released during the week ahead:

  • Monday: August durable orders
  • Tuesday: September consumer confidence, August wholesale inventories, July Federal Housing Finance Agency July Home Price Index, July S&P/Case-Schiller Home Price Index
  • Wednesday: August pending home sales
  • Thursday: Revised Q2 GDP, weekly initial and continuing unemployment claims
  • Friday: August personal consumption and personal income, September Markit Purchasing Managers Index and Institute for Supply Management September Manufacturing Report, University of Michigan consumer sentiment

IMPORTANT DISCLOSURES

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. All market and index data comes from FactSet and MarketWatch.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

U.S. Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

For a list of descriptions of the indexes referenced in this publication, please visit our website at lplresearch.com/definitions.

This Research material was prepared by LPL Financial LLC.

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Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.

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