Markets were mixed this week, with the S&P 500 reaching new all time highs. Economic data was mixed, but the most impactful news was a substantial increase in nonfarm payroll hiring, with the 850K June hiring surge coming in at approximately 17% over analyst expectations. On the downside, the unemployment rate rose along with disappointing construction spending and manufacturing PMI numbers. Overall, the economy is well positioned to continue recovering from pandemic lockdowns. New COVID-19 infections remained little changed this week, with 7 day moving averages rising by slightly more than 1500 a day over the prior week. The most recent infection data keeps the moving average near lows not seen since March 2020 during the pandemic’s first wave.

Overseas, developed markets outperformed emerging markets, with both indices returning negative performance. European indices were mostly negative, while Japanese markets returned negative performance as well for the week. Improving prospects against the pandemic as well as improved prospects for economic recovery should continue to help lift markets globally over time.

Markets were mixed this week as investors continue to assess the state of the global economy. While fears concerning global stability and health appear to be in decline, the recent volatility serves as a great reminder of why it is so important to remain committed to a long-term plan and maintain a well-diversified portfolio. When stocks were struggling to gain traction last month, other asset classes such as gold, REITs, and US Treasury bonds proved to be more stable. Flashy news headlines can make it tempting to make knee-jerk decisions, but sticking to a strategy and maintaining a portfolio consistent with your goals and risk tolerance can lead to smoother returns and a better probability for long-term success.

Chart of the Week

Materials companies have underperformed as of late, and the value of the sector has diverged from the value of the underlying commodities in which they primarily operate. Divergences like these tend to be temporary, which will likely prompt an increase in materials companies or a decrease in industrial metal prices.

Market Update


Broad market equity indices finished the week mixed, with major large cap indices underperforming small cap. Economic data has been mostly encouraging, but the global recovery has a long way to go to recover from COVID-19 lockdowns. 

S&P sectors were mixed this week. Technology and consumer discretionary outperformed, returning 3.24% and 2.07% respectively. Financials and energy underperformed, posting -0.11% and -1.08% respectively. Energy maintains its lead in 2021 with a 44.52% return.


Oil rose this week as crude oil inventories shrunk more than expected. Energy markets have been highly volatile in the COVID era, but it appears that rising prices may be more of the norm given recent market fundamentals. Demand is still low compared to early 2020, but as global economies are continuing to open up, oil consumption is recovering rapidly. On the supply side, operating oil rigs are still well under early 2020 numbers, but trending upwards. In addition to supply and demand, a volatile dollar is likely to have a large impact on commodity prices. 

Gold rose slightly this week even as the U.S. dollar strengthened. Gold is a common “safe haven” asset, typically rising during times of market stress. Focus for gold has shifted again to include not just global macroeconomics surrounding COVID-19 damage and recovery efforts, but also inflation and its possible impact on U.S. dollar value. 


Yields on 10-year Treasuries fell this week from 1.5241 to 1.4238 while traditional bond indices rose. Treasury yield movements reflect general risk outlook, and tend to track overall investor sentiment. Expected increases in future inflation risk have helped elevate yields since pandemic era lows in rates. Treasury yields will continue to be a focus as analysts watch for signs of changing market conditions. 

High-yield bonds rose this week as spreads tightened. High-yield bonds are likely to remain more stable in the short to intermediate term as the Fed has adopted a remarkably accommodative monetary stance and major economic risk factors subside, likely helping stabilize volatility.

Lesson to be Learned

The wise man bridges the gap by laying out the path by means of which he can get from where he is to where he wants to go.”

-J.P. Morgan

FormulaFolios Indicators

FormulaFolios has two simple indicators we share that help you see how the economy is doing (we call this the Recession Probability Index, or RPI), as well as if the US Stock Market is strong (bull) or weak (bear).

In a nutshell, we want the RPI to be low on a scale of 1 to 100.  For the US Equity Bull/Bear indicator, we want it to read at least 66.67% bullish. When those two things occur, our research shows market performance is typically stronger, with less volatility.

The Recession Probability Index (RPI) has a current reading of 20.19, forecasting a lower potential for an economic contraction (warning of recession risk). The Bull/Bear indicator is currently 100% bullish, meaning the indicator shows there is a slightly higher than average likelihood of stock market increases in the near term (within the next 18 months).

It can be easy to become distracted from our long-term goals and chase returns when markets are volatile and uncertain. It is because of the allure of these distractions that having a plan and remaining disciplined is mission critical for long term success. Focusing on the long-run can help minimize the negative impact emotions can have on your portfolio and increase your chances for success over time.

The Week Ahead

This week will be shortened due to observance of the July 4th holiday, and will see fewer than usual economic releases. The highlights of the week will be non-manufacturing PMI data, as well as outcomes from the OPEC meetings. 

More to come soon. Stay tuned.