The Waiting Game

Weekly Market Update | August 9, 2021

Highlights

Globally, stocks finished the week higher with the MSCI All Country World Index rising 1.0%. In the U.S., the S&P 500 climbed 0.9% while the Dow Jones Industrial Average rose 0.8%. Emerging markets rebounded after the previous week’s sharp sell off – rising by 1.2%. The 10-year U.S. Treasury yield climbed 7 basis points to 1.30%. This is the first week that the 10-year yield closed higher since June 25th.

Falling interest rates and concerns about the Delta variant have led to a pause in the reopening trade with cyclical stocks taking a step back and technology stocks rallying since early June. The economic impact of the Delta variant and the path of Fed policy remain open questions, but investors may not need to wait much longer for answers.

It is possible that we are nearing a peak in the most recent wave of U.S. Covid cases. In both India and the UK, the Delta surge peaked after about 45 days. The U.S. is nearing that threshold as well, but a potential return to offices and schools in September remains an uncertainty. If the pattern does hold, then it could reignite investors’ interest in cyclical stocks and potentially push Treasury yields higher as concerns about a potential U.S. slowdown abate.