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Juncture Wealth Strategies - June 2021 Market Update Thumbnail

Juncture Wealth Strategies - June 2021 Market Update

Fed Interventions

The Federal Reserve has embarked on substantial interventions which have increased its balance sheet by approximately $2.5 trillion since March. This has been seen in the accelerating money supply growth.

Unemployment Rate

The U-3 Unemployment Rate was reported to decline from 14.7% to 13.3%. There are some issues with worker classifications. However, the number coincides with the start of the trend of workers returning to their jobs. The longer it takes for the states to reopen, the higher the number of jobs which will be permanently lost and the longer the job recovery will take.

Financial Conditions Index

The credit markets flirted with shutting down in Feb/March. The Fed began significant operations to support those markets. These operations were extended to corporate, high yield, municipal and credit ETF markets. Since that time, the financial conditions have improved to near typical conditions.

S&P Sectors Performance

The recent low in the S&P 500 occurred on March 25. Since that time, the top performing sectors are Energy, Basic Materials, and Consumer Discretionary which are considered cyclical. This confirms that the economy has bottomed, and the recovery is in place.

Earnings Growth Forecasts

Over the past few weeks, earnings forecasts for the S&P 500 have stabilized as investors have digested the “less bad” economic numbers which have been reported. As shown below, the US and Europe have the largest percent of positive earnings revisions. The earnings low should be experienced in the second quarter with a recovery to positive growth in first quarter 2021.

Value to Growth Ratio

Value to Growth Ratio is beginning to turn upwards after years of decline to multidecade lows. We need to see if this trend continues. This inflection may have drastic implications for how investors should invest over the next 5-10 years.

ISM Manufacturing Index

ISM Manufacturing Index has begun to recover from its low. As the economy reopens, we expect to see the index continue to improve. We may begin to see a trend in moving supply chains from China to the US for “essential” items in healthcare and technology. If this trend occurs, this index may increase significantly over time.

ISM Non-Manufacturing Index

The Service sector has rebounded from its low but is still firmly in contraction territory. We expect that the index will recover to expansion as the economy reopens. How quickly this occurs is based upon state governments.

US Treasury Curve

The US Treasury Curve has begun to steepen as the Treasury sells new issues to fund a record fiscal deficit. The excess supply may eventually cause the longer-term yields to rise as bond investors demand higher returns.

US Dollar Index

US Dollar (USD) has begun to decline as the economy has reopened and the Federal Reserve has flooded the financial system with liquidity. In 2019/2020, the US dollar was strong due to a lack of USD to satisfy foreign demand. Due to the massive issuance of US Treasuries, the supply may now be matching demand eliminating a key support. As such, this may indicate that the US Dollar may weaken. A weakening USD may provide support for International/Emerging Market equities to outperform.

International Equity Markets

As the US Dollar declines and the global economy recovers, global equity markets are poised to outperform the US equity markets based on better valuations and earnings trends.

Emerging Markets

After underperforming the US equity market for many years, Emerging Markets are attractive from a valuation and earnings perspective. Excess financial liquidity may lift the Emerging Market equities and may begin to outperform the US equity markets over the next five years.



To summarize:

  • The Fed has stabilized the financial markets via various interventions
  • Economic data has been ‘less bad’ and indicates the beginning of the economic recovery
  • The improved economic forecasts, increased money supply, steeper US Treasury yield curve and lower US Dollar may see the Value factor outperform the Growth factor
  • Many of the above reasons may also propel the International/Emerging Markets to outperform the US equity market
  • Equities may be more volatile


Based on recent trends, we are staying with our neutral stance in US equities and our overweight in Growth. We are looking for confirmation of the recent outperformance of Value over Growth and International/Emerging Market over US. Once we see confirmation of those trends, we will be increasing exposure to those subasset classes. Additionally, we are cautious regarding investing on longer term fixed income instruments. The steepening yield curves, low levels of interest rate and potential future inflation may increase the price risk for owning longer term bonds. We are optimistic that the US economy has bottomed and has begun its recovery. As the recovery takes hold, the equity market may experience increased volatility as investors assess whether equities have outrun the economic recovery in the short run.


Disclaimer: This newsletter is provided to you for informational purposes only. Any specific firm or security presented should not be construed as an endorsement or recommendation by Juncture Wealth Strategies, LLC. No advice may be rendered by Juncture Wealth Strategies, LLC unless a client service agreement is in place. Please consult with your financial advisor before making any investment. Information provided by Bloomberg is believed to be accurate but has not been verified.