Market Update: June 14th 2021

Nate Crosby |

Market Update 06/14/2021 (click to watch video) and see proof we don’t edit our videos! This one was rough but we made it!

     More pieces; the same amount of pizza.  That’s what investors of Nvidia (NVDA) and The Trade Desk (TTD) will have over the next few weeks.  Nvidia is doing a 4 for 1 share split and The Trade Desk is doing a whopping 10 for 1 trade split.  This just means if you own 1 share of Nvidia you will own 4 shares after June 20th and if you own 1 share of The Trade Desk, you will own 10 after June 17th. 

     We bring this to your attention not because this is a reason to buy the stock, (though we are highly confident in the long-term prospects of Nvidia) we provide this information so when you see the share price ¼ or 1/10th of what it was the day before, you don’t panic.  You will have the same amount of pie, just more slices.  What is important is not the number of slices, but the quality of the pie. 

     We see a giant tug of war taking place in the market.  On one end of the rope, you have companies reporting record quarterly earnings and a strengthening economy.  On the other end of the rope, you have the prospects of rising interest rates and inflation.  Which will win out?  Over the long run, I believe stocks will win out.  I believe the market will continue to trend up and to the right. Though, I do expect significant periods of volatility.  If you love to pick your stocks over an extended period of time, this may be a fun few months for you, as we expect ample opportunities provided by daily market fluctuations.

     Are we potentially seeing a break-out of some popular stocks from 2020?  Time will tell, but Adobe (ADBE) shares have come to life in recent weeks.  Adobe currently trades at a P/E of 48. So far this year the market has punished stocks with elevated multiples like Adobe.  As of the writing of this letter, Adobe shares are up over 7% in the past 5 days.  We are seeing signs of life again from Apple (AAPL).  Apple has been negative for the 2021 year but has risen 3.5% in the past week. Expect the tug of war to continue, but long-term the market can’t continue to ignore companies that keep putting up record earnings.

     If the economy continues to hit the growth targets that have been laid out by people much smarter than me, we should expect to see bond yields continued to rise.  As a result, we continue to be in short-duration investment-grade bonds to protect against the threat of rising interest rates.  Our superstar year-to-date in the fixed income space has been PIMCO’s Corporate & Income Opportunity (PTY) which is up 14% for the year and the ETF yields over 7%.  PTY is a component of all our investment models with the exception of our Conservative Strategy.

     Real Estate continues to shine.  The majority of our real estate exposure comes through Vanguard’s Real Estate Index Fund (VNQ). Many investors have questioned what will happen to real estate when interest rates do rise.  I expect rising rates to begin to affect residential home sales as rising rates will eventually price some buyers out of the market.  However, keep in mind VNQ is full of commercial real estate as well which should do well in recovery.  So far the threat of every business closing their offices and working from home has not come to pass. I for one, love our office!

     If you liked the clip you can watch the full episode on our podcast Dynamic Growth.  This episode will be released next Wednesday!