Summertime, and the livin’ is easy. At least that is the case for US stocks this year.
Stocks continued to soar in July as major indices reached all-time-highs yet again. Growth / tech-oriented companies set the pace as the Nasdaq 100 added 2.78%. Not far behind, the S&P 500 climbed 2.27%. Larger companies fared better than smaller companies as a whole, with rising COVID cases shifting investor preference from earlier in the year.
While large US tech companies remained strong, there was no such luck overseas – specifically in China (continue reading for more details on that). Developed international stocks were able to squeak out a slight gain, but emerging market stocks saw modest losses due to the Chinese tech sell-off.
Bonds were able to add to their recent momentum with another positive month as the 10-year Treasury yield dropped sharply from 1.45% to 1.24%. This brings the US Aggregate Bond Index to just -0.50% YTD after starting the year with three consecutive negative months.
In the spirit of the Olympics, if the year were to end today, we would give large-cap US stocks the gold medal while emerging markets would be going home without any hardware (lucky for them, there are still five months left to turn it around).
Following years of negotiations, a historic $26 billion settlement for the opioid epidemic has been announced.
How did we get here? Over 3,000 separate lawsuits from across the country accusing drugmakers and distributors of lax controls and oversight, allowing addictive painkillers easier access into illegal channels, were combined into a larger single case.
Under the proposed settlement, distributors McKesson, Cardinal Health, and AmerisourceBergen are expected to pay a combined $21 billion over 18 years, while Johnson & Johnson would pay $5 billion over nine years.
However, the ultimate amount to be paid is dependent on the extent states sign up and approve the deal.
This is the second-largest settlement in US history (behind the $206 billion deal with tobacco companies in the 1990s).
Chinese tech stocks lost hundreds of billions of dollars worth of market cap in July.
The losses piled up during the month as regulators came down on tech giants like Alibaba (China’s Amazon), Didi (China’s Uber), Baidu (China’s Google), and ByteDance (parent of Gen Z favorite TikTok).
Strict rules were also placed on for-profit tutoring companies, accelerating the sell-off (over 60% of students in China receive tutoring).
While it still isn’t clear the exact reason behind the crackdown, experts believe this was a way for Beijing to get in front of a growing tech influence, which could threaten the regimes’ power.
Losses slowed later in the month as Beijing tried to calm investors, but it appears risks will remain elevated until there is more clarity on China’s regulatory push.
Broad Market Returns
| Index | 1 Month | 3 Month | YTD | 1 Year |
| S&P 500 (VOO) | 2.45% | 5.46% | 18.11% | 36.40% |
| NASDAQ (QQQ) | 2.86% | 7.99% | 16.48% | 37.95% |
| Large Cap Growth (VUG) | 3.18% | 7.83% | 17.15% | 37.04% |
| Large Cap Value (VTV) | 1.01% | 2.67% | 18.00% | 37.75% |
| Small Cap Growth (VBK) | -1.33% | 0.56% | 7.02% | 36.02% |
| Small Cap Value (VBR) | -1.65% | -0.47% | 21.04% | 57.73% |
| Developed International (VEA) | 0.50% | 3.14% | 11.08% | 33.60% |
| Emerging Markets (VWO) | -5.89% | -3.02% | 2.66% | 21.51% |
| REITs (VNQ) | 4.42% | 8.04% | 26.78% | 35.46% |
| Aggregate Bonds (BND) | 1.17% | 2.23% | -0.63% | -0.87% |
| Corporate Bonds (VCIT) | 1.25% | 2.98% | 0.00% | 1.76% |
| High Yield Bonds (JNK) | 0.18% | 1.58% | 2.96% | 8.41% |
| Long Term Treasuries (VGLT) | 3.66% | 7.85% | -4.43% | -11.02% |
| International Bonds (BNDX) | 1.49% | 1.87% | -0.66% | 0.52% |
Fun Facts – August Edition
- August tends to be a more volatile month for markets as professional traders flee the office for a summer finale vacation, leading to lighter trading volume, which can have an amplifying effect on market movements.
- On August 6, 1762, the first ever sandwich was recognized – named after John Montagu, the 4th Earl of Sandwich. The Earl was an avid gambler, and during a long binge he asked the house cook to bring something he could eat without getting up from his seat, thus the meat and bread sandwich was born!
- Lefties rejoice! August 13 is international left-hander day (only about 10% of the population).
- Make sure to lock up your valuable art. The Mona Lisa was stolen on August 21, 1911 and wasn’t recovered until two years later!
Derek Prusa, CFA, CFP® and Ben Webster, CFP®
Co-Founders and Owners of Aspire Wealth
Mutual Funds Vs ETFs
