June 2021 Monthly Outlook – Fully Invested Bear

Financial markets basically traded sideways during May, with stocks gaining 0.5% (S&P 500), while interest rates declined slightly dropping 0.05% (US 10yr Treasury).

We have a number of key economic reports and events in June that may dictate whether the market continues to trend sideways or makes a move either up or down.  On June 4th we get the May Jobs report, which will be an indication of how the job market is recovering with the economy opening up.  June 15-16 is the next Federal Reserve Board meeting, and I will be watching how they respond to the rising inflation we are seeing.  June 30th brings the start of 2nd quarter corporate earnings reports.

June is also a weak month for stocks, producing positive results only 40% of the time over the last 20 years with average returns for the month roughly negative 1%.

Two other factors I am watching closely: 

  1. The total market capitalization (stock price x # of shares) is now at an extreme level compared after a crisis, which then had a multi-month, double-digit pullback before resuming the rally                        
  2. The March 2020 rally to present is starting to resemble a pattern to the 1982 and 2009 recoveries to GDP.  This is one of Warren Buffet’s warning signs that stocks are expensive. 
Expectations (1)

Based on the above, I am operating as fully invested bear.  In the short to medium term, I am cautious about a potential correction.  Longer term, I believe the bull market and economic recovery from Covid-19 has further room to run.  As such, we have tightened up our risk levels but remain fully invested in broadly diversified portfolios and will adjust as conditions dictate.

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I want to extend a special thanks to clients & colleagues who have recently referred us to family and friends:  Greg & Valerie W.

June Calendar of Events   (comments and additions for future months are always welcome)

  • June is LGBTQ Pride Month.  I’m an incredibly proud father of a daughter in an awesome same sex marriage.  So let’s all work towards acceptance and inclusion of people regardless of their sexual orientation.

June 14th        Flag Day                  

June 20th        Summer begins – it’s certainly going to be a different summer.  Enjoy it safely       

June 20th        Father’s Day  – wishing all father’s, grandfathers, and great grandfathers a wonderful day.

Sources:  Bloomberg, Ned Davis Research, Day Hagan Asset Management, CNBC

Although information herein has been obtained from sources deemed reliable, its accuracy and completeness are not asserted. All opinions and estimates included in this report constitute the judgment of the financial advisor as of the dates indicated and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Investing involves risk and you may incur a profit or a loss. Diversification does not ensure a profit or ensure against a loss. There is no assurance that any investment strategy will be successful.  Past performance is no assurance of future results.

Please consider the charges, risks, expenses and investment objectives carefully before investing. Please see a prospectus containing this and other information. Read it carefully before you invest or send money.

Information provided should not be construed as legal or tax advice.  You should discuss any tax or legal matter with the appropriate professional.

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