September 2021 capital markets outlook and risk metrics
In August, large cap US equity indices posted strong, positive returns, whereas performance degraded further down the market capitalization spectrum.
US large cap growth stocks outperformed value stocks; however, US mid cap and small cap value stocks generally outperformed growth stocks.
Outside of the US, stocks posted positive returns.
Across the credit and duration spectrum, US fixed income markets posted mixed returns during August. High Yield bonds and bank loans outperformed government and TIPS bond indices.
The Bloomberg Commodities Index posted a negative return for the month while REITs posted positive returns. REITs have posted among the strongest year-to-date performances.
The US vaccination efforts combined with the American Recovery Act have lifted 2021 GDP forecasts for the US to 6.5%. However, the Delta variant and some concerns regarding the duration of the vaccine efficacy may weigh on growth through the end of the year.
The continued march of US equities toward new records implies that the markets are looking past COVID, despite a less-than full recovery to pre-COVID levels of economic activity.
Investors continue to focus their thoughts on Fed policy and the Biden administration’s fiscal agenda, with a particular focus on economic stimulus, taxation, regulation, and broad infrastructure spending.