Monthly Market Commentary - Unique Wealth
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Monthly Market Commentary
August 2021
Where We Are
Because it was the time of several of his great military triumphs, including the conquest of Egypt, the month
originally called Sextilis (in Latin) was renamed in 8 BC in honor of the first Roman Emperor, Augustus (63
BC-14 AD). Originally named Gaius Octavius, he was officially renamed Augustus (meaning “revered,“
“venerable,” “consecrated by augury,” or even “favored by the gods“) by the Roman Senate in 27 BC,
reflecting the unrelenting patience, skill, and efficiency with which Augustus overhauled virtually every
aspect of Roman life and brought durable peace and prosperity to the Greco-Roman world.
Given the “august” +17.0% year-to-date gain in the S&P 500 index through the end of July — as shown in
the chart on the following page, when the index advanced +2.3%, its sixth consecutive monthly advance —
investors may do well to keep in mind that despite August’s +7.2% total return in 2020, over the past 30
years, August has turned out to be the second worst performing month, declining an average -0.2% in total
return over the 1991-2020 time frame. As shown in the chart below, over the three decades from 1990
through 2019, August and September on average (not always) have generally produced lackluster returns
for the S&P 500 index.
Also worth noting in the accompanying table on the following page is the past five months’ sluggish
performance of the Russell 2000 index of small and mid-capitalization companies. After significantly
outperforming the S&P 500 index in January and February, the Russell 2000 index has not matched the S&P
500 index in any month since, and actually retreated -3.6% in July.
Past and projected performance
1
does not guarantee future results.
MARKET COMMENTARY - AUGUST 2021
Monthly and Year-to-Date Price Performance
YTD
Index/Commodity Jan. Feb. Mar. Apr. May Jun. Jul. (through 7/30)
S&P 500 -1.1% +2.6% +4.2% +5.2% +0.5% +2.2% +2.3% +14.4%
Nasdaq Composite +1.4% +0.9% +0.4% +5.3% -1.5% +5.5% +1.2% +12.5%
Russell 2000 +5.0% +6.1% +0.9% +2.1% +0.1% +1.8% -3.6% +17.0%
Gold -2.6% -5.9% -1.6% +3.6% +7.9% -7.3% +2.6% -6.5%
West Texas Int. Oil +7.5% +18.0% -3.8% +7.3% +4.4% +10.8% +0.6% +51.4%
Source: The Wall Street Journal, and Yahoo Finance.
The multi-month lackluster performance of the Russell 2000 index may be ascribed to a puzzling, often
internally contradictory gallimaufry of factors, including, among them: (i) an increased concentration of
mainstream institutional and individual investors’ interest in the heavyweight big five “Atlas” or “Hercules”
stocks (Apple, Microsoft, Amazon, Facebook, and Alphabet/Google); (ii) continued focus by social media-
and discussion forum-based millennials on meme stocks and short-dated call options buying; (iii)
expectations of profit margin pressures owing to the fact that higher input and labor costs may not be able
to be easily passed on by Russell 2000-type firms in the form of price increases; (iv) assumptions that rising
interest rates, if they occur, would chiefly hurt small and mid-cap companies who borrow money since they
tend not to be as flush with cash and liquidity as the much larger enterprises; and (v) — especially when
viewed in conjunction with the meaningful declines in 10- and 30-year U.S. Treasury yields — perhaps a
message is being sent about the possibility of a larger-than-generally-anticipated deceleration in economic
activity in 2022.
Speaking of mystifying, it would not be unduly exaggerating to observe that the course of intermediate- and
long-term U.S. Treasury yields over the past two months has wrong-footed a significant number of investors
and market commentators. After rising 11 basis points (0.11%) in June to finish the month at 0.25%, two-
year U.S. Treasury yields declined six basis points (0.06%) to close at 0.19% on July 30 th. More surprisingly to
many market participants, after declining 13 basis points (0.13%) in June to end the month at 1.45%, 10-
year U.S. Treasury yields (as shown in the accompanying chart) declined another 21 basis points (0.21%) to
close at 1.24% on July 30th. And equally baffling, after declining 20 basis points (0.20%) in June to wind up
the month at 2.06%, 30-year U.S. Treasury yields declined a further 17 basis points (0.17%) to close at
1.89% on July 30th.
Source: FactSet • By The New York Times
Past and projected performance
2
does not guarantee future results.
MARKET COMMENTARY - AUGUST 2021During July, following the course of declining U.S. Treasury yields, the U.S. dollar retreated -0.4% versus the
DXY index comprised of six major currencies (Euro, Japanese yen, British pound, Canadian dollar, Swiss
franc, and Swedish krona). On June 30, the DXY index was 92.44 and on July 30 th, the index closed at 92.09.
Over the course of the month, West Texas Intermediate crude oil prices rose +0.7%, from $73.47 per barrel
on June 30th to $73.95 per barrel on July 30th. With the global economy and global oil demand continuing to
gradually recover from the effects of the coronavirus pandemic, on the supply side: (i) facing pressure from
investors to moderate growth and address their emissions amid concerns about increasing regulations and
climate change, large U.S. and European oil companies continue to spend sparingly to boost production
despite higher prices; (ii) consolidating U.S. shale producers have exercised financial probity and exerted
capital spending discipline; and (iii) following the 19th OPEC and non-OPEC ministerial meeting in mid-July
(and a post-meeting ratification of new output quotas for selected countries), the group (which includes
Saudi Arabia, Russia, the United Arab Emirates, Kuwait, Iraq, and other countries) agreed to increase output
by a further 0.4 million barrels per day per month from August until December 2021, aiming to fully phase
out production cuts by September 2022.
Worrisome Developments
Possible Earlier-than-Expected Moves Toward Monetary Policy Tightening: As shown in the accompanying
chart, respondents to a Bank of America global fund manager survey expect the Federal Reserve to begin
hiking interest rates in the second half of 2022 or the first half of 2023. In addition, numerous major global
central banks besides the Fed appear committed to reducing stimulus — the European Central Bank, the
Bank of England, the Bank of Japan, the Bank of Canada, and the Reserve Bank of Australia. In late-July and
early-August media interviews, St. Louis Federal Reserve President James Bullard, Fed governor Christopher
Waller, and Fed Vice Chair Richard Clarida, among several other senior Fed officials, have begun to outline in
greater detail their thinking about a path toward more timely withdrawal of monetary policy support,
including: (i) the commencement of trimming the Fed’s $120 billion in monthly Quantitative Easing (money
printing to purchase U.S. Treasury and mortgage-backed securities); (ii) reducing this Quantitative Easing
rate to zero sometime in early 2022; and (iii) expressions of additional readiness to raise interest rates
earlier than anticipated if inflation threatens to remain too high for too long.
Past and projected performance
3
does not guarantee future results.
MARKET COMMENTARY - AUGUST 2021The Delta Variant of COVID-19: As shown in the accompanying chart, the share of all residents in each of
the 50 states who have been fully vaccinated against COVID-19 as of July 4th ranges from 29.89% (in
Mississippi) to 65.98% (in Vermont). In recent weeks, the Delta variant of COVID-19 has gained momentum,
with the most rapid rates of increase among the unvaccinated. The Delta variant is twice as transmissible as
the Alpha variant first recorded in England, which itself was 40% more infectious than earlier forms of the
virus first detected in China. While the Delta mutant of COVID-19 remains reason for caution, its likely
impact on economic reopening and recovery needs to take into account the low numbers of
hospitalizations and fatalities compared with infections. For the week ended July 30th, the Centers for
Disease Control and Prevention reported that the 7-day moving average for new cases reached 66,606,
more than quadruple the June 19th weekly figure and up +64.1% versus the prior week. According to the
World Health Organization, global infections have surged to an average of 540,000 a day, and an average of
almost 70,000 weekly deaths. Although highly unlikely to lead to anything approximating the severity of
closures and lockdowns experienced during the height of the pandemic in 2020, the Delta variant (and
possible additional variants, as the coronavirus third wave may create fertile breeding grounds for more
infectious and potentially vaccine-resistant new variants) has affected consumer, worker, teacher, student,
and parental psychology and behavior, thereby leading to a resurgence in hesitancy to engage in activities
considered to be high-risk (such as dining out, visiting shopping malls, working out in gyms, and attending
entertainment and sporting events), thereby slowing the trajectory of recovery and economic restoration. It
is worth keeping in mind that nearly 80% of Americans over the age of 65 — those at highest risk — and
60% of all adults are fully vaccinated. In fact, a silver lining of the summer 2021 Covid-19 surge may be an
intensified impetus toward even higher levels of vaccination, which would hasten the country’s progress
toward a more complete economic recovery.
Past and projected performance
4
does not guarantee future results.
MARKET COMMENTARY - AUGUST 2021Uncertain Course of Inflation: In June, the core — excluding food and energy prices —Personal
Consumption Expenditures price index (the Fed’s preferred measure of inflation) rose +0.7% month-over-
month and +3.5% year-over-year; the core Consumer Price Index rose +0.9% month-over-month and +4.5%
year-over-year (the highest rate of growth in 13 years); and the core Producer Price index rose +1.0%
month-over-month and +5.6% year-over-year (with the headline Producer Price Index up +1.0% month-
over-month and +7.3% year-over-year, its fastest rise since November 2010). Partly due to ongoing supply
chain disruptions, logistics cost pressures, and shortages of labor in certain sectors, inflation for the time
being appears to be somewhat more enduring than previously anticipated. In our opinion, inflation in fact
may not turn out to be so transitory, and while the U.S. economy is unlikely to return to the very high
inflation rates of the late 1970s, at the same time, to us it appears unlikely that consumer prices will return
to the 2%-and-below rates of price change prevailing in the years immediately preceding the coronavirus
pandemic.
Broadening Evidence of Elevated Investor Bullishness: As shown in the accompanying chart, during the
first half of 2021, annualized equity inflows were greater than the cumulative amount of equity inflows in
the entire preceding 20 years. Data stretching back to 1951 from Ned Davis Research show that American
households had nearly 60% of their portfolios allocated to equities at the end of March 2021, a figure just
below the all-time high of 61.7% reached during the dotcom bubble of the late 1990s. According to Charles
Schwab Corporation, when households’ equity allocations have risen to 54.6% or higher, the average
annualized return for the S&P 500 over the next 10 years has been only +4.1%, as compared to the +10.3%
return the S&P 500 has averaged since 1965.
Past and projected performance
5
does not guarantee future results.
MARKET COMMENTARY - AUGUST 2021Taxes’ Potential Impact on Economic and Financial Activity: Although the final details of any additional
Corporate, Personal, Estate, and Capital Gains tax changes (to pay for some portion of the various
infrastructure initiatives) are not yet specified, when they do become clearer they are likely to influence
securities prices and financial market conditions. As shown in the accompanying chart, which depicts the
price return of the S&P 500 index six months before and six months after capital gains taxes were
increased, by far, the six months before capital gains are increased represent the periods of most risk to
equity prices. Taking an average of the 1975-1976, 1986–1987, and 2012-2013 equity market reactions to
episodes of capital gains tax increases, the S&P 500 index declined -1.3% in the six months before capital
gains taxes were increased and gained +17.9% in the six months after capital gains taxes were increased.
China’s Authorities Exercising Increased Control: Since November 2020, Chinese regulators have taken
more than 50 actual or reported actions in sectors including ride-hailing, food delivery, for-profit tutoring,
streaming, and online gaming aimed at realigning the relationship between private business and the
state. From a peak in February 2021 through August 5th, more than $1 trillion in aggregate market value
declines have occurred in the six largest Chinese technology companies due to regulatory edicts — relating
to issues including Variable Interest Entities (the precarious legal structure underpinning many of China’s
largest equity listings in the U.S.), monopolistic behavior, financial stability, and data security. Such
intensified regulatory assertiveness has increased equity market volatility and heightened risk awareness in
China and globally.
Reduced Affordability of Shelter: Against a backdrop of historically low mortgage interest rates, reduced
housing inventory levels, and the broadest global housing price boom in 20 years, the rising price of housing
for homeowners and renters has raised U.S. policymakers’ concerns about affordability: According to July
data from the S&P CoreLogic Case-Shiller index, national house prices in May were +16.6% year-over-year,
up from +14.8% in April, the largest rate of gain in more than three decades.
Past and projected performance
6
does not guarantee future results.
MARKET COMMENTARY - AUGUST 2021Constructive Developments
Currently Reasonable Expectations of Near-Term Monetary Policy: The Federal Open Market Committee
(FOMC) statement and Fed Chair Jerome Powell’s press conference following the FOMC meeting on July 27-
28th have for the moment confirmed financial market participants’ generally expected tapering timeline of:
(i) announcement in August or September of the tapering schedule; (ii) commencement of tapering
beginning in December 2021 or January 2022; and (iii) initial tapering likely projected at $10 billion per
month in U.S. Treasury securities and $5 billion per month in mortgage-backed securities. Fed Chair Powell’s
acknowledgment of higher inflation and admission that inflation may very well persist longer than initially
expected implies that, at least for now, the Federal Reserve continues to allow inflation to run above target
and actively seeks to escape a Japanese-style deflationary mire by promoting longer-term inflation.
Positive Corporate Profit Results and Sanguine Forward Guidance: During the 2021 second calendar
quarter earnings reporting season — even as Apple’s profits guidance was deemed somewhat disappointing
by investors — mega-cap tech companies Microsoft and Alphabet/Google reported very positive earnings;
equally significant has been the broadly positive revenue and earnings commentary and forward outlook
from reopening sectors including airlines, credit card companies, restaurants, and numerous other industry
groups leveraged to the economic recovery and reopening. As of August 6th, according to FactSet, securities
analysts were carrying the following forecasts for S&P 500 revenues and earnings, respectively: 1Q2021,
+10.9% and +52.5%; 2Q2021, +24.7% and +88.8%; 3Q2021, +14.4% and +28.0%; 4Q2021, +11.0% and
+21.4%; for the full 2021 calendar year, +14.3% and +41.6%, and for the full 2022 calendar year, +6.5% and
+9.5%.
Quickening Pace of Labor Market Gains: Following net employment gains of +614,000 jobs in May and
+930,000 jobs in June, the US economy added +943,000 jobs in July, with the unemployment rate declining
-0.5 percentage points to 5.4%. The July U-6 unemployment rate (a measure of all unemployed, marginally
attached, and part-time for economic reasons individuals as a percent of the civilian labor force plus all
marginally attached workers) reached 9.2% in July, down 0.9 percentage points from 10.1% in June, and
average hourly earnings increased +0.4% month-over-month in July and +4.0% year-over-year. The
Aggregate Payrolls Index (comprised of the average workweek, changes in employment, and wage growth)
gained +1.0% in June, +0.9% in July, and on a year-to-date basis, is rising at a +9.6% annualized rate. Even
though the U.S. economy remains a total of 5.7 million jobs below the pre-pandemic levels of February
2020, employment rolls have added +16.7 million jobs since the employment low point reached in April of
last year.
Healthy U.S. Economic Growth: Even though some mild hints of a reduction of economic momentum have
surfaced in some quarters of the economy, our view remains that the strong economic activity continues to
be supportive of risk assets including equities, commodities, private equity, and real estate. The July ISM
Services index reached an all-time record high of 64.1 versus 60.1 in June, and the July ISM Manufacturing
index registered a still quite strong 59.5 versus 60.6 in July. In its June 16 Summary of Economic Projections
report, the Federal Reserve was carrying the following median economic projections for U.S real GDP: 2020
actual: -3.5%; 2021 est.: +7.0%; 2022 est.: +3.3%; 2023 est.: +2.4%; Longer Run: +1.8%. And
following 1Q21 GDP growth of +6.3% annualized, the 2Q21 advance report of GDP (issued on Thursday, July
29th, with a revised report to be released on Thursday, August 26th, and the final report released on
Thursday, September 30th) came in at +6.5%, with the Atlanta Fed GDPNow estimate (as of August 6th) of
3Q21 GDP growth at +6.0%. It is at the same time worth keeping in mind that the global economy is likely
to experience GDP deceleration of varying magnitude in 2022 and beyond as economic growth slows down
Past and projected performance
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does not guarantee future results.
MARKET COMMENTARY - AUGUST 2021from its recovery velocity to a steadier state.
Significant Excess Savings: As shown in the accompanying chart, the excess dollars saved above the average
monthly savings from January 2017 through February 2020 has reached $2.6 trillion as of the end of May
2021, representing significant liquidity available to be deployed into spending and investing — in the
present era of ultra-low and even negative interest rates (please see the Fixed Income Securities comments
in the Portfolio Positioning Section at the end of this Commentary).
Past and projected performance
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does not guarantee future results.
MARKET COMMENTARY - AUGUST 2021PORTFOLIO POSITIONING
Portfolio Positioning Strategies:
In the current moderately slowing yet still robust economic expansion and softer yields environment, we
believe that careful thought, planning, and attention needs to be devoted to the investor’s most
appropriate forms and vehicles for implementing the fundamental elements of Asset Allocation and
Investment Strategy, which include:
i. Diversification: while it doesn’t guarantee a profit or ensure against a loss, diversification means
having sustainably low- and negatively-correlated investment exposures that truly counterbalance price
movements in other assets, particularly during times of great financial stress and/or market volatility;
ii. Rebalancing: which encompasses using concepts of reversion to the mean to trim exposures to assets
that have grown to represent too large a portion of the overall portfolio, while at the same time,
adding exposure to high-quality assets that have fallen out of investor favor and suffered significant,
though deemed not permanent, price declines vs. intrinsic value;
iii. Risk Management: which involves recognizing when markets have become consumed by meme
securities, momentum plays, “story stocks,” and information overload — a situation that has pertained
in recent months to more than a few companies in the technology space — and understanding the
degree of liquidity, the true pricing realism, and the appropriate roles of short-term liquid securities,
real assets, financial assets, and alternative assets in decades-long (or longer) regimes of inflation,
stagflation, deflation, monetary disruptions, and currency resets;
iv. Reinvestment: which encompasses knowing when to emphasize and trade off income versus capital
growth, all the while keeping in mind the critical importance of discipline, equanimity, patience, tax
awareness, and longevity in capturing and compounding dividend, coupon, rental, and other income
flows; and
v. Asset Protection and Husbandry: which encompass considerations of income and capital gains
taxation at the state, local, federal, and possibly international level; estate planning; relevant insurance
design and structuring; cybersecurity shielding; portfolio monitoring and reporting; administrative
costs; forms, frequency, and means of access; and custody.
Portfolio Positioning Principles:
We continue to allocate to a considered and considerable exposure to equities, with judicious shifts
between styles, sectors, geographies, and — where appropriate from a cost, timing, tax, liquidity, and size
standpoint — public versus private markets. Expressed below are a number of themes that we believe
should be taken into consideration over the next few years in selecting asset categories, asset classes, asset
managers, sectors, companies, and security types:
i. Paying Attention to the Value of Money: Taking advantage of (rather than being taken advantage of
by) the likelihood of money printing, internal and external currency debasement, government debt
monetization, and the ‘Modern Monetary Theory’ approach that to some degree in the pandemic-
response era has been pursued by the Authorities — within shifting money and credit cycles — to
service America’s massive explicit government and corporate indebtedness and the enormous implicit
obligations of pension and healthcare promises;
Past and projected performance
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does not guarantee future results.
MARKET COMMENTARY - AUGUST 2021PORTFOLIO POSITIONING
ii. Concentrating on “All-Weather” Sectors and Companies: Seeking investments with balance and
flexibility, that are able to thrive regardless of: which political persuasion informs the thinking and
policies of the White House, Congress, and the regulatory authorities; evolving Environmental, Social,
and Governance (ESG) priorities and values; wealth distribution initiatives and public health conditions;
and wider socioeconomic trends;
iii. Distinguishing Between Temporary and Permanent Change: Focusing on the commercial and financial
implications of new social and political power structures, alliances, and geopolitical relationships; new
energy sources and resources; new trade patterns; new on- and offshoring channels; new “WFH” and
“WFA” (Work From Home and Work From Anywhere) employment modalities; and new business
models, pathways, digitalizations, and forms of person-to-person and business-to-business work,
leisure, learning, and wellness activity;
iv. Taking Advantage of Demographic Tailwinds: Through U.S. and select non-U.S. companies, gaining
exposure to, and meeting the rising needs, aspirations, and spending power of, the rapidly expanding
global middle class, especially in Asia;
v. Comprehending and Verifying Past Success: Emphasizing companies and sectors that have
demonstrated successful track records and past experience in: capital allocation; balance sheet
strength; risk management; sustainably defendable business models; and the ability to generate and
sustain high multiyear returns on equity (derived from revenue growth and favorable margin
preservation, rather than through overly high levels of leverage) meaningfully above the companies’
and sectors’ weighted average cost of capital; and
vi. Identifying Innovative and Disruptive Technology Hegemons: Focusing on technology enablers,
disrupters, and dominators in biotechnology, diagnostics and therapeutics based on CRISPR (Clustered
Regularly Interspaced Short Palindromic Repeats), weight management and wellbeing, public health,
medical nutrition, regenerative medicine, artificial intelligence, data analytics, machine learning, 5G
cellular network technology, the Internet of Things, infrastructure, robotics, retraining, quantum
computing, battery inventions, alternative energy, electric vehicles, and cybersecurity, while not least,
also taking account of the Environmental, Social, and Governance (ESG) characteristics of companies in
these and other fields.
Past and projected performance
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does not guarantee future results.
MARKET COMMENTARY - AUGUST 2021Important Disclaimers and Disclosures
Unique Wealth (“Unique”) is a registered investment adviser with the Securities and Exchange
Commission. Any reference to the terms “registered investment adviser” or “registered” does not imply
that Unique or any person associated with Unique has achieved a certain level of skill or training. A copy of
Unique Wealth’s current written disclosure statements discussing our advisory services and fees is
available for your review upon request.
This message is intended for the exclusive use of clients or prospective clients of Unique Wealth. It should
not be construed as an attempt to sell or solicit any products or services of Unique or any investment
strategy, nor should it be construed as legal, accounting, tax or other professional advice. Different types
of investments involve varying degrees of risk, and there can be no assurance that any specific investment
will either be suitable or profitable for a client or prospective client’s investment portfolio.
This material is proprietary and may not be reproduced, transferred, modified or distributed in any form
without prior written permission from Unique. Unique reserves the right, at any time and without notice,
to amend, or cease publication of the information contained herein. Certain of the information contained
herein has been obtained from third-party sources and has not been independently verified. It is made
available on an "as is" basis without warranty. The content of this communication is provided solely for
your personal use and shall not be deemed to provide access to any particular transaction or investment
opportunity. Unique does not intend the information in this Presentation to be investment advice, and the
information presented in this communication should not be relied upon to make an investment decision.
The views expressed in the referenced materials are subject to change based on market and other
conditions. This document contains certain statements that may be deemed forward‐looking statements.
Please note that any such statements are not guarantees of any future performance; actual results or
developments may differ materially from those projected. Any projections, market outlooks, or estimates
are based upon certain assumptions and should not be construed as indicative of actual events that will
occur.
Historical performance results for investment indices and/or product benchmarks have been provided for
general comparison purposes only, and do not include the charges that might be incurred in an actual
portfolio, such as transaction and/or custodial charges, investment management fees, or the impact of
taxes, the incurrence of which would have the effect of decreasing historical performance results.
Past and projected performance
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does not guarantee future results.
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