Equity markets surged higher last week as earnings season got off to a great start. Several large banks reported strong earnings, which helped push equity markets higher. Goldman Sachs reported that their year-to-date revenue in 2021 is already the highest annual revenue recorded in firm history, and there is still a quarter of the year left[1]. The S&P 500 (a proxy for large-cap US stocks) was up 1.8% for the week and the MSCI ACWI index (a proxy for global large-cap stocks) jumped 2.2%[2].
An important footnote to the strong bank earnings reports last week was the broad agreement by bank leadership that inflation, and wage inflation in particular, remains a concern. Goldman Sachs CEO David Solomon commented, “there’s real wage inflation across all aspects of the economy right now"[3].
As one can see below, the US Consumer Price Index, a commonly used gauge of inflation, has risen to levels not seen in more than a decade. The Federal Reserve’s stance that inflation will be short-lived is being called into question more often recently, especially in areas like wage inflation.
Prices & Interest Rates
| Representative Index | Current | Year-End 2020 |
|---|---|---|
| Crude Oil (US WTI) | $82.00 | $48.52 |
| Gold | $1,767 | $1,893 |
| US Dollar | 93.95 | 89.94 |
| 2 Year Treasury | 0.41% | 0.13% |
| 10 Year Treasury | 1.59% | 0.93% |
| 30 Year Treasury | 2.05% | 1.65% |
| Source: Morningstar, YCharts, and US Treasury as of October 16, 2021 |
Asset Class Returns
| Category | Representative Index | YTD 2021 | Full Year 2020 |
|---|---|---|---|
| Global Equity | MSCI All-Country World | 14.8% | 16.3% |
| Global Equity | MSCI All-Country World ESG Leaders | 16.4% | 16.0% |
| US Large Cap Equity | S&P 500 | 20.4% | 18.4% |
| US Large Cap Equity | Dow Jones Industrial Average | 17.0% | 9.7% |
| US Small Cap Equity | Russell 2000 | 15.6% | 20.0% |
| Foreign Developed Equity | MSCI EAFE | 10.4% | 7.8% |
| Emerging Market Equity | MSCI Emerging Markets | 1.2% | 18.3% |
| US Fixed Income | Bloomberg Barclays Municipal Bond | 0.7% | 5.2% |
| US Fixed Income | Bloomberg Barclays US Agg Bond | -1.7% | 7.5% |
| Global Fixed Income | Bloomberg Barclays Global Agg. Bond | -4.2% | 9.2% |
| Source: YCharts as of October 16, 2021 | |||
[1] Source: Goldman Traders Deliver Surprise Surge in Firm’s Best Year - Bloomberg
[2] Source: YCharts
[3] Source: Wage Inflation Is Spreading Through the Economy, Goldman Sachs CEO Says - Bloomberg
Download PDF Version
Past performance may not be representative of future results. All investments are subject to loss. Forecasts regarding the market or economy are subject to a wide range of possible outcomes. The views presented in this market update may prove to be inaccurate for a variety of factors. These views are as of the date listed above and are subject to change based on changes in fundamental economic or market-related data. Please contact your Financial Advisor in order to complete an updated risk assessment to ensure that your investment allocation is appropriate.