Transcript:
Tom Vaughan:
Hello everybody, welcome to Monday. It’s a Red Shirt Day today, unfortunately. The S&P 500 was down 1.6%: Wear the red shirt whenever it’s down more than one and a half, and the green shirt whenever it’s up more than one and a half. I’ll tell you one thing interesting, I haven’t worn either one of those shirts for quite a while. The market has been slowly but surely just marching along hitting new all time highs, over and over and over again. So this is a bit of a pullback, I think this is actually a very normal environment. And this is what happens when you kind of stretch that rubber band, without having a pullback. And so honestly, I feel a fairly positive here in this situation, that you’ll probably have a little bit of an additional pullback. Today was a pretty big red day, but then it just creates this buying opportunity, and the market takes off.
And I would say the one thing that’s really interesting, the virus growth seems to be the major catalysts that happened today. Now I’ll tell you that from a couple different spots. First of all, if you look at the data, the number of cases just in the last month has grown quite drastically across the US. There’s still a huge amount of people that are vaccinated, but there’s enough that aren’t that are going to create a higher spread. This delta variant is 225% apparently more contagious than the original COVID-19. So, you know, it has that’s fear that comes in from that.
But if you look at kind of, and you can also see what happened today, in terms of the stocks in the stock market itself, and the bond market. So one of the things I look for is when the market falls, what does better? And my list today looks like a list from last year, during the pandemic. And that tells you again, that that was probably the main fear today. So number one: Bonds went up, which they’re supposed to do, generally speaking, when the market goes down. The Total Bond Market Index at Vanguard, BND, was up over half percent today, so that’s good. That’s one of our huge holdings. You know, that’s why we have bonds.
But the other stuff, the stock stuff that either you know, went up, or didn’t go down as much as the market again, just reads like the list from last year. So, cloud computing, genomics, right? Innovative technology, cyber security, online retail, semiconductors, software, health care, ESG portfolios, top 200 growth companies in America, the technology companies out of the S&P 500: Those are all pieces of the market that did better today, than the market did. And that’s the same pieces that did better, last year in February, March and April, when the market was really, really worried about the virus coming out. And again, these are companies that can operate in in a virus environment or needed, like genomics and health care and those types of thing.
So I think that’s exactly what you’re seeing today. I’m not positive this holds up; we do have a vaccine. The vaccine is out there, as far as that goes. A lot of this is happening in rural areas that don’t have as much impact on the overall Gross Domestic Product in the economy here. I don’t think there’s a will here to lock everything down again, like we did. I don’t even think it’s necessary, as much as it used to be. We’ve learned a lot about how to operate. I think this is a fear that probably won’t play out completely. And again, that just gives opportunity. So when this market does continue to come down, eventually, the reality sets in that, “hey, the economy’s still going to be okay here.” Earnings are still going to be okay and we are in the middle of earnings season, so we’re probably going to see some decent earnings reports that come out, and what have you.
I do think that the big fear of growing too fast, and creating hyperinflation has definitely mitigated, and you can see that. I mean, again if you look: The 10 year Treasury peaked out back in April, and it’s been coming down ever since. Watch the bond market, it’ll tell you what’s happening. The bond markets been saying for a long time, the economy isn’t going to be that hot, and I think that’s okay. We want to find that, not too hot, not too cold, kind of that Goldilocks zone. And that’s what we’ve been in, I think that’s what we’re still going to be in here.
So anyway, that’s what’s happening right now. Very fascinating. Again, feel free to share this with other people that you know, maybe don’t get the same information. But this isn’t something to be super concerned about, in my opinion. I think there’ll be some opportunities here in the next couple of weeks, as this thing plays out. So anyway, that’s what’s happening today. Look forward to talking tomorrow. Thank you.