View: Summer stall continues

June 7, 2021

Our view: Equity markets are rotating sector leadership during the continued summer “stall” and second quarter “dead zone.” Equity markets rose back toward all-time highs, with the S&P 500 adding 0.6%. Energy led with a 6.7% rally, while health care lagged. U.S. payrolls rose 559,000 in May, highlighting that while demand is poised to remain very strong through the second half of the year, supply-side constraints could persist. It is summer: people work less and spend more time out of the office.

Economics view

In the US, the mismatch between labor supply and demand is a key issue for policymakers. The ease of finding a job has returned to pre-pandemic levels. However, labor market supply remains suppressed due to early retirement, generous unemployment benefits and lingering health concerns. Individuals that would otherwise take jobs on offer appear to be delaying the search. Expect employment gains to continue to build in H2 2021 as unemployment benefits run out and labor is forced back into the market.

Equities and inflation view

Equity markets point to a relatively flat open to start the week, after adding 0.6% last week on the back of a large gain in the “old-line/traditional” energy sector. Treasury yields have rallied despite all the talk of inflation and labor shortages. As a result, the 10-year Treasury rate sits at 1.58% this morning. This is well off of the 1.75% high seen earlier in the year at the peak of the “70s style inflation returning” fanciful headlines.

We will have additional data on equities and inflation dynamics later in the week. Skip to the end of this week’s charts and tables for the summary chart.

Global view

Monday is starting off mixed. Asia is down with the Hang Seng/Hong Kong (-0.5%) and the CSI 300/mainland China (-0.1%) while the Nikkei/Japan (+0.3%) and the KOSPI/Korea (+0.4%). Europe is mildly higher, 0.2%, on average.

Resources

Charts and tables

Cumulative market total returns, week ending 6/4/2021

 

Long-term stocks performance after year-to-year peaks in S&P 500

view of Long-term stocks performance after year-to-year peaks in S&P 500

Earnings impact of tax reform

view of Earnings impact of tax reform

Podcasts and videos

Interesting reading

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Weekly market updates contain general information and express the views of Oak Harvest Investment Services. Oak Harvest believes that all data, articles, and information cited are reliable at the time of creation. However, Oak Harvest does not warrant any information contained herein to be correct, complete, accurate or timely.

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