June – July 2021

U.S. Economic and Market Highlights


  • U.S. GDP expanded in the second quarter at an annual rate of 6.5%, below expectations of 8.4%, largely due to inventory shortages in the supply chain; however, the US economy is now larger than it was before the pandemic. The service sector grew for the 13th straight month.
  • Consumer confidence rose and personal expenditures accounted for the majority of overall GDP growth in the second quarter.
  • Growth expectations have been tempered recently because of waning fiscal stimulus, higher prices, softening global demand, and the COVID-19 delta variant.
  • Concerns around longer term inflation continue to heat up, as supply chain bottlenecks and strong consumer demand have put upward pressure on prices.
  • Future home construction permits fell to an eight-month low, likely stemming from uncertainty caused by expensive building materials and labor shortages.
  • The Fed Chair indicated that inflation is likely to remain elevated in the coming months before moderating.


  • Yields across much of the maturity spectrum moved lower in the U.S., which led to a flattening of the yield curve primarily due to the Fed’s shift away from the very dovish stance undertaken earlier in the year.
  • Bond investors have become less enthusiastic about growth prospects for the global economy long-term. Demand for U.S. bonds continues because of their safe-haven status and because yields are still higher in the U.S. than in most other developed countries. 
  • Declining bond yields mean increased bond prices. In July the aggregate bond index return was up 1.12% driven mostly by interest rate sensitive bonds (e.g., long-term government bonds). Year-to-date and 12-month bond index returns remain negative as current yields are higher than levels during 2020 and 1Q-2021. 
  • Investment-grade and high-yield corporate bond spreads widened in July compared to Treasury Bonds, reflecting a decline in excess returns for corporate bonds.  


  • Current economic, market, and policy environments remain favorable to risk assets, including global equities and corporate credit, despite recent concerns about economic growth reaching peak levels.
  • Growth stocks outperformed value stocks in July as communication services, technology, and consumer discretionary sectors showed the strongest performance and utilities and energy sectors lagged.
  • Second quarter corporate earnings exceeded estimates at 87% of the companies reporting results thus far led by the large tech companies.
  • Emerging country equity markets declined in July -6.7% led by China at -13.8%. This negative return erased previous gains year-to-date for the emerging market index. (See Market Tracker below.)
  • The main concern for global markets remains the spread of the delta variant. The highest number of recent cases reported are in the Brazil, India, Indonesia, Iran, U.K. and U.S. with rapidly increasing cases in Australia, China, France, Russia, Spain, and Turkey. Around the world governments are discussing and in some cases imposing tougher mobility restrictions. 
  • More companies are embracing Environmental, Social, and Governance (ESG) goals as a key part of risk management. The reasons are not just to report Corporate Social Responsibility (CSR) activity to financial security regulators who have increased their disclosure requirements.
  • Companies are finding ways to improve ESG integration into strategic planning processes and every day operations with hopes of improving performance and creating long-term value for shareholders while contributing to the common good.


  • Automation is no longer just about reducing costs. Improving business resilience and lowering risk have become the top goals for implementing automation. COVID-19 pandemic has accelerated the ongoing trend in automation.
  • Implementation in recent decades has mostly taken the form of industrial robots. Over the last 15 years, the use of robots has expanded significantly. The number of installed robots in the U.S. reached 2.28 per thousand workers in 2019, more than four times the 0.45 robots per thousand workers in 2004.
  • Research from Massachusetts Institute of Technology (MIT) concluded that each additional robot replaces 6.6 jobs. The net effect is 3.3 jobs lost per robot since robots create positions in other industries by lowering prices for goods and services which, in turn, boosts overall demand.
  • Industrial robots could replace over 5 million jobs globally over the next two years, if the International Federation of Robotics’ forecast for the number of installed robots is accurate.
  • This trend may lead to worsening income inequality. White collar jobs including paralegal work, accounting, and back-office operations could be displaced by the next phase of automation. McKinsey & Co. forecasted that 10% of the U.S. workforce is vulnerable to automation by 2030.
  • Some economists argue there is a counterbalance to automation replacing jobs. Their argument states that new labor-substituting technologies increase overall labor demand by growing economic activity through lowering prices for goods and services and boosting productivity. Increasing economic activity would likely create jobs in other industries that have not been automated. New technologies can also grow labor demand by creating jobs in new industries.
  • Another facet of this discussion is the skills gap between automated jobs and newly created professions. Many economists advocate for the private and public sector to address the skills gap by investing in training programs to help displaced workers attain new skills.
  • If policymakers and companies implement effective programs to help mitigate the drawbacks of automation, then the historical fears of new technology hurting workers may once again prove to be mostly unsubstantiated.

This communication was prepared for informational purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security/instrument or to participate in any trading strategy. Past performance is not indicative of future results.