"Investors that do the best, and have done the best, are those that stay and compound at above-average rates over the long term." - John Paulson, Paulson & Co.

Happy Wednesday,

Overall, the S&P, Dow and Nasdaq were up in August. That followed a very solid July where the market was up broadly across that board. In August, the S&P was up 2.9%, the Dow was up 1.2% and the Nasdaq increased 4.0%.

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 25% of the population refuses to get the vaccine. That fact drives the possibility that the Delta variant will push our recovery backward into 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 September. 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, August was a good month. Our public equities portfolio, which includes a significant amount of hedging, is up more than 13% YTD and up 31% 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 2.9% to 4,523 in August, as the markets focused both on value and growth investments and the hope for a quick economic rebound.
The Dow was up 1.2% to 35,361 in August, as the markets continued the un-even rotation into value investments, especially industrial and consumer staples.
Nasdaq increased 4.0% to 15,259 in August, as Tech stocks heated back up again especially in the second half of the month.

In August, 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 September, we believe the public markets will continue the slow rotation to 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 10% in August and expect it will remain in that range in September as well.

We especially like the Financial and Industrial sectors where values are more reasonable, and growth should increase as the country opens back up for business. Morgan Stanley, 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. You can view our TOP 10 investments here.

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

Have a wonderful September and 2021 ahead!

Best regards,

Marlene

Marlene Oddo
Partner
PointFour Capital, LLC