The stock market applauded the Jobs report on Friday that showed strong payrolls – but with enough concerns to keep the Fed on hold. The Nasdaq led, posting a weekly gain of 1.9%, followed by the S&P up 1.6% and the Dow trailing, but still up 1%. With the markets at all time highs going into 2H:21, the question on investors minds is – what can go wrong?

There are several aspects to consider when looking at investing for the 2H:21. Here are a few major concerns:

  1. Inflation – Higher costs could mean lower profits. Lower earnings implies lower valuations which in turn, means lower stock prices.

  2. Fed scales back bond buying – Next Fed meeting is July 28th. All eyes and ears will be on the messaging from the Fed.

  3. Sector growth – 1H:21 has seen a rotation from growth to value and now back to growth. Which sector will see appreciation in 2H: 21?

Future Wealth’s View

Just last week, we had made a compelling case to take money out of bank accounts and invest in the stock market. As if on cue, the stock market roared to all time highs.  The concerns facing the market, stated above, are all valid. In many ways, the Fed controls the market direction now. And it behooves them to not start cautioning the market of runaway inflation. Fed chair Powell knows this and we fully expect him to play along with the optimism shown in the stock market this week. As such, we do not expect any alarming comments to be made in the upcoming Fed meeting.

But, that does not mean that other Fed members will not be making brash statements to the press to take the stock market astray for a day or two. As always, we recommend that investors remain patient and let their investments work over the long term. Best course of action for investors in July is to take a beach holiday or visit parents/grandparents you have not seen in awhile. That is time better spent than monitoring your portfolio on a daily basis.