Week in Review


Week in Review: July 30, 2021 

Moderating Expectations


U.S. equities climbed slightly higher amid mixed economic data, upward corporate earnings revisions and the Senate’s advancement of the bipartisan infrastructure bill. On Wednesday, the Federal Open Market Committee (FOMC) announced their decision to maintain low interest rates, acknowledged some economic progress and hinted that the tapering clock is ticking. Federal Reserve (Fed) Chair Jerome Powell followed his usual script, expressing his views that inflation is transitory and that the labor force and economy will strengthen in coming weeks. We maintain our outlook that the Fed will not begin tapering until late-2021 or 2022 and will not raise policy rates until at least 2023. 

Second quarter GDP rose 6.5% (annualized), which was significantly lower than expected and cast slight doubt on the U.S. economic recovery. However, the underlying components portrayed a more optimistic outlook. The headline shortcoming is largely attributable to prolonged inventory shortages, which stalled growth. Once this supply problem subsides, it should allow for manufacturing to further accelerate and the GDP to pick up. Even with the GDP coming in below expectations, it is still trending much higher than pre-pandemic levels and reflects the gradual nature of the recovery. The upside, in our view, is that the current speed of growth is more stable but still robust, alleviating some Fed concerns about the economy overheating. In response, 10-year Treasury yields firmed to about 1.25% by Tuesday and closed the week around that level. 

U.S. housing data moderated, dampening some enthusiasm for the growth backdrop, while rising consumer confidence, spending and durable goods enhanced it. One of the headwinds to housing is that high prices are discouraging would-be buyers. Home sales declined to an unexpected low of 676,000 in June. Since housing is a potent leading indicator, the slowdown raised some concern, but other data was more upbeat. Consumer confidence boomed to its highest level in 17 months in July, despite looming fears of inflation and the emerging delta variant (see Figure 1). Consumer spending surged by 11.8% and fixed income by 8% during the quarter. Orders for durable goods also increased, although by less than expected. This week’s mismatched economic data reminds us to continually readjust our expectations for growth, without becoming overly skeptical or enthusiastic.  

U.S. equities shrugged off last week’s rising growth concerns and were mixed for the week, with Value and Small Caps leading. More broadly, U.S. equities are on track to cap off a sixth-straight monthly gain in July. Amid more upward earnings revisions, consensus S&P 500 earnings for 2021 now tally $190, the highest level since before the pandemic. The pace of growth expected for 2022 is set to slow to around 10%. Chinese equities have recently induced a bout of volatility, roiling segments of the market. For the month, the Hang Seng Index fell 10%, following a series of regulatory reforms and extensive framework adjustment from Beijing, which aimed most closely toward tech and education companies. We continue to guard against periods of episodic volatility, but our thesis remains that strong earnings should underpin stocks. 

We believe that a solid, higher-for-longer, nominal growth backdrop will last until the back half of 2022 and help bolster corporate earnings. As a result, we prefer stocks to bonds but suggest that maintaining a disciplined approach to investing with proper diversification is key to managing risk.


Figure 1: Conference Board U.S. consumer confidence (index)

    consumer confidence

Source: Bloomberg (as of July 30, 2021). 


Market Returns (USD) as of 7/29/2021





Global Equities

S&P 500

1.2% 2.9% 18.6% 37.7%

Dow Jones Industrial Average

0.8% 1.8% 15.8% 34.8%


0.6% 1.9% 15.1% 41.2%

Russell 2000

1.9% -3.0% 14.0% 50.9%

First Republic Founders Index

0.5% -1.0% 13.8% 50.2%

Russell 1000 Equal Weighted

1.7% -0.1% 18.2% 43.0%

Fixed Income

ICE BofAML Municipals 1-10 Year A-AAA 

0.1% 0.6% 1.0% 2.1%

Bloomberg Barclays Intermediate Government/Credit

0.0% 0.6% -0.3% 0.2%

Bloomberg Barclays High Yield Bond

0.1% 0.4% 4.0% 11.0%

Market Levels


Week Ago

Year End

Year Ago

S&P 500

4367.48 4360.03 3756.07 3276.02

Dow Jones Industrial Average


34823.35 34987.02 30606.48 27005.84

10-Year U.S. Treasury Yield (Constant Maturity)

1.27% 1.31% 0.93% 0.60%

Gold ($/oz)

$1,806.92 $1,829.47 $1,898.36 $1,871.41

Crude Oil ($/barrel)

$71.91 $71.38 $48.19 $43.19

U.S. Dollar / Euro ($/)

1.18 1.18 1.22 1.16

U.S Dollar / British Pound ($/£)

1.38 1.38 1.37 1.27

Japanese Yen / U.S. Dollar (¥/$)

110.14 109.83 103.25 107.15