The Three I’s

Weekly Market Update | August 16, 2021

Highlights

Globally, stocks finished the week higher with the MSCI All Country World Index climbing 0.7%. In the U.S., the S&P 500 climbed 0.7% while the Dow Jones Industrial Average rose 0.9%. Emerging markets fell 0.9% even though Chinese equities rebounded a touch. The 10 year U.S. Treasury yield climbed higher for most of the week, but closed the week largely unchanged after a weaker than expected consumer sentiment report dragged yields lower.

Investors are currently focused on infrastructure, inflation, and interest rate developments (the three I’s). A “hard” infrastructure bill seems likely be passed eventually, but further negotiations will be necessary with the House returning from recess on August 24. Inflation may be nearing a peak, but is likely to remain above pre pandemic levels for a lengthy period of time. After fourth months of consecutive declines, the 10 year U.S. Treasury yield may be stabilizing and reversing course.

The Delta variant remains a wild card with many individuals set to return to the office or school in coming days. However, high frequency economic data have yet to show a material impact from the recent surge in Delta cases…suggesting that we have increasingly learned to live with the virus.