“Every once in a while, the market does something so stupid it takes your breath away.”
- Jim Cramer, CNBC Host and leaders of Cramerica

Happy Monday,

Overall, the S&P, Dow and Nasdaq were up in July. That followed a very solid June where the S&P and Nasdaq were up and the Dow pulled-back a bit. In July, the S&P was up 2.3%, the Dow was up 1.3% and the Nasdaq increased 1.2%.

In our view, the markets continue to be driven by the Covid-19 recovery phases, government support payments and the unyielding support of the Federal Reserve. There continues to be an optimistic feeling regarding the reopening of the economy, even though 30% of the population refuse to get the vaccine. That fact drives the possibility that the Delta variant will push our recovery backward in the fall/winter in certain parts of the country.

In addition, the probability of some form of tax reform later this year is adding to that uncertainty. Countering that is the real probability that a finalized $1.2T Infrastructure Plan will become law in August. Therefore, we believe the markets will remain a bit uncertain, with small pull-backs becoming a regular event for the rest of Q3 ’21.

That said, July was a good month. Our public equities portfolio, which includes a significant amount of hedging, is up more than 11% YTD and up 28% on a 1-year basis. In our view, growth is no longer the only “name of the game” and we believe that value stocks will help to drive the market higher, but at a much slower pace.

The S&P went up 2.3% to 4,395 in July, as the markets focused both on value and growth investments and the hope for a quick economic rebound.
The Dow was up 1.3% to 34,936 in July, as the markets continued the un-even rotation into lower PE, value investments, especially industrial and consumer staples.
Nasdaq increased 1.2% to 14,673 in July, as Tech stocks cooled off a bit based on valuation concerns.

In July, Covid-19 infections, hospitalizations, and deaths in the U.S. continued to trend lower, but the Delta variant has taken a toll in select low-vaccine areas of the country. Investors have also shrugged off any of the negative aspects of how we will pay for the $1.9T Recovery Plan and the bipartisan $1.2T Infrastructure Plan.

Additionally, M&A transaction volume continued to be robust, and the Fed continued its unprecedented support of the economy. The Housing sector also continues to be a bright spot with strong consumer demand thanks to low interest rates.

In August, we believe the public markets will continue the slow rotation to lower PE, value and industrial stocks and that overall returns will be positive, but mixed. That is not to say that growth stocks do not have a place in this robust economy. They do, but they will have to share the limelight with value stocks. We maintained the cash/bond portion of our public equities’ portfolio at 14% in July and expect it will remain in that range in August as well.

We especially like the Financial and Industrial sectors where PE ratios are more reasonable, and growth should increase as the country opens back up for business.

Morgan Stanley, Verizon, B. Riley, JP Morgan, Microsoft, Berkshire, J&J, United Health Care, BofA, Microsoft, and Honeywell all continue to be top selections as we view them as stronger and more nimble competitors in their respective sectors. Please visit our site to view our TOP 10 investments.

Thanks again for your consideration & for sharing your thoughts and ideas with us.

Have a wonderful August and 2021 ahead!

Best regards,
Marlene

Marlene Oddo
Partner
PointFour Capital, LLC