Surprise, Surprise!

There are always surprises in the Olympics, and this year is no different. Among the surprises, Bobby Finke, U.S. Olympic swim team member with no previous international success, showed a penchant for finishing strong to beat all the favorites in both the 800m and 1500m freestyle.

Similarly, in the markets, the underdogs for the last many weeks came in ahead of the “big dogs.”  The S&P MidCap 400 Index and the small-cap Russell 2000 Index broke a string of underperformance and recorded gains, while the large-cap benchmarks and the technology-focused Nasdaq Composite index ended the week with modest losses. Similarly, recently underperforming utilities shares reversed course and were among the best performers in the S&P 500 Index, along with materials and real estate stocks. A decline in Amazon.com shares weighed on the consumer discretionary sector following news that the online retailer missed consensus second-quarter revenue expectations. It was the busiest week of the earnings season, with 177 of the S&P 500 companies reporting second-quarter results.

While earnings reports drove large moves in individual stocks—including several technology and internet-related giants—investors appeared to keep a close eye on macroeconomic concerns. On Tuesday, the S&P 500 ended lower for the first time in six sessions, which was attributed in part to the spread of the Delta variant of the Coronavirus. Additionally, the Commerce Department reported its advance estimate that gross domestic product (GDP) increased at an annualized rate of 6.5% in the second quarter, well shy of consensus estimates of around 8.5%. Many analysts pointed to lingering supply chain problems as preventing stronger growth.

Despite missing estimates, the Commerce Department report represents the second-fastest pace of growth since 2003 and left the economy larger than its pre-pandemic peak.  Other positive macro news, like the Senate vote Wednesday evening in favor of beginning formal consideration of a bipartisan $1 trillion infrastructure proposal, July consumer confidence numbers, and an easing of inflation expectations all are helping poise the market for a good start to the month of August.

Surprises await us, as we continue through the summer months, so we will continue to plan wisely.  Of course, one thing we hope won’t surprise you in the coming weeks is a satisfaction from God through His steadfast love, that we may rejoice and be glad all our days (Psalm 90:14).

Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights

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