Markets Struggle to Shake Off End of Summer Doldrums

September 17th, 2021

For the second consecutive week, stocks struggled to find direction as concerns over the economic impact of the Covid-19 delta variant across the globe outweighed this week’s otherwise healthy, U.S. economic data. U.S. consumers bucked economists’ gloomy forecasts, which had predicted a -0.80% drop in August retail spending. Instead, buyers pushed sales up by a healthy 0.70%. Buyers benefitted from continuing price relief as pricing growth further eased from its June peak. Despite what were generally decent economic reports, markets remain concerned over the uncertain Q4 2021 outlook with the delta variant continuing to be a factor. China, which had previously contained Covid, has struggled with a rash of cases in recent weeks, hampering global supply chains, and leading to a pullback in both Chinese consumer and business spending. The resurgence in China, and Asia more generally, had investors worrying whether full-year, global growth targets can now be achieved, dragging the S&P 500 down -0.57% for the week.    

Consumers Shop Away Delta Concerns

A rise in Covid cases did little to dent consumers’ spending appetite. Back-to-school shopping and child tax credit payments helped lift retail sales 0.70%. The month-to-month gain helped offset July’s -1.80% drop. August’s sales were driven by a surge in ecommerce and furniture store sales which offset a decline at auto dealerships and restaurants and bars. Online sales rose 5.30%, while furniture stores saw a 3.70% increase as recent homebuyers looked to fill their new homes. Auto dealerships continued to struggle last month primarily due to a lack in inventory. The combination of Covid and strong aggregate demand has strained global microchip inventory, forcing automakers to cut production. With less cars available to sell, sales dipped -3.60% for the month. Restaurants and bars were also casualties of the delta resurgence. Sales were flat during the month as more diners stayed away from indoor dining. Economists have been forecasting a pullback in consumer spending. This was expected not only because of a rise in Covid cases but also due to the depletion in consumers’ savings and overall consumption fatigue. The potential silver lining is that the past eighteen months have conditioned consumers in how to alter their spending habits in such a way that it now appears the current Covid wave is having less of an impact than initially predicted.

Inflation Appears Transitory

Consumer price growth continued to ease in August. The Consumer Price Index (CPI), which measures a basket of consumer goods, rose 0.30%. That’s down from the index’s 0.90% peak in June. Excluding the volatile food and energy components, consumer prices rose just 0.10% in August. Energy prices accounted for much of the month’s topline increase with gasoline prices rising 2.80%. Car buyers saw some price relief with used car and truck prices falling -1.50%. This is somewhat contradictory given the elevated demand and limited supply for automobiles. It was a welcomed reading nonetheless given that used car prices had been a major factor in recent headline inflation readings – which in turn had concerned markets. The waning CPI trajectory added credence to the Fed’s position that higher inflation will be temporary and will return to normal once the economy settles back to its pre-pandemic patterns. 

China Economic Recovery Slows Amid Covid Surge

Concerns arose this week over the Chinese economy as the country battles a resurgence of Covid-19 within its borders. While Covid is a global affliction, its impact in Asia is believed to be particularly pronounced on the world economy given the region’s role within the global supply chain. In the case of China specifically, both its role as an exporter and its willingness to enact strict containment policies had investors on edge as they digested this week’s data. While forecasts had called for a 7.00% increase in retail sales in August, they fell well short of estimates by mustering just a 2.50% rise. Industrial production also slowed during the month, rising just 5.30%. This was down from a 6.40% increase in July. The country remains in a race against the clock to contain its latest outbreak in Fujian province just as the week-long National Day holiday is slated to kick off on October 1st. The holiday is a major tourist season with millions spent on goods and services. The latest outbreak could keep consumers home again this year and lead to further weakening of the economy.

The market may have been downbeat this week, but the fact is, the data shows that the U.S. economy continues to solider on despite the recent Covid wave. Aside from in-person services, such as restaurants and bars, and supply constrained sectors, such as the auto industry, the surge in Covid cases has not had much of an impact on the on-going economic recovery. The Atlanta Fed is still forecasting a 3.60% Q3 2021 GDP while its blue-chip consensus forecasters paint a rosier picture of 5.00% growth. Although that’s down from the economy’s early reopening momentum this year, it is well above the pre-Covid normal of 2.00%. Still, markets have found themselves struggling for direction over the last several weeks. This should not come as a surprise. Markets have maintained a torrid pace this year with virtually no corrections to speak of. A breather had to be expected. Put that together with the fact that September is seasonally the weakest month for equities, and one can forgive the softness we’ve seen over the last couple weeks. 

The Week Ahead

It will be a big week ahead for markets as the Federal Reserve holds its FOMC meeting. Traders will be tuning in to see whether the Fed outlines its bond taper program. Also on tap next week is the latest on the housing market with reports on existing and new home sales.


One of the Oldest Pastimes Taking Flight

Birdwatching has surged in popularity over the last year as people flocked to the pastime to get closer to nature, enjoy the great outdoors, and to experience hours of entertainment. Sales of bird seed and feeders, bird baths, binoculars, and other birdwatching accessories have soared with $2.2 billion projected in sales for 2021. Downloads of bird identification apps have spiked as well, and the National Audubon Society reported that unique visits to their website were up by half a million. The online community data gathering website eBird reported a 45% increase in bird photos and 84% increase in audio recordings of bird calls uploaded to their wildlife media archive as users documented their sightings. The eBird website is a data repository managed by the Cornell Lab of Ornithology that helps birders track their favorites and learn what other birders are finding. Users share their bird sighting information which also helps research and conservation efforts. The eBird database announced earlier this year that it surpassed more than one billion bird observations. That is a lot of bird sightings.

There are 10,000 species of birds around the world, and while the pandemic may have slowed things down for human life, birds are still migrating, building nests, singing, chirping, hunting, and laying eggs. More and more people are discovering that the world of birds is more vibrant and exciting than they had realized. One birder marveled at learning the different collective nouns that are used to describe large groups of birds, such as a muster, tidings, rafter, a band, a host, a spring, a chime, and even a kettle. Who knew that the collective noun for a flock of owls is a parliament or study or that a parrot flock is called a pandemonium? Additionally, flamingos are called a flamboyance, and then there is also a bevy of larks, an asylum of loons, a party of jays, and a murder of crows.

Birds typically have a scientific name and a common name. The scientific name has two parts, the first for its group or genus, and the second is its individual designation or species, such as the Cathartes aura (Turkey Vulture) and the American Robin, Turdus migratorius. This two-name system for birds and other plants and animals was developed in the mid-18th century by a Swedish scientist named Karl von Linne, who became known by the Latinized form of his name, Linnaeus.

Birds are often named for a distinct feature, behavior, geography, or song that makes them stand out. The Eastern Bluebird is the easternmost blue thrush in North America, and the Mandarin Duck is named for its native range in China. The Cedar Waxwing gets its name from the waxy tips on its secondary feathers, and the Ruby-Crowned Kinglet is named for its boldly-colored crown. The Broad-winged Hawk is named for its wing shape, and the Swallow-tailed Kite is named for its deeply forked tail. The Noisy Friarbird is really noisy.  

The American Ornithological Society maintains the names of bird species in North America. Their checklist links each scientific name with one standardized English-language common name. The organization has been the keeper of the official list of names since 1886. As scientists learn more about individual birds and their genetic structures, bird species may be split apart or lumped together. For example, the Rufous-sided Towhee (plumage name) was split into two Towhee species – the Eastern Towhee (geographic name) and the Spotted Towhee (plumage name). Bird names not only give great clues about the bird, but also about the history of ornithology and birding. Some of the more interesting bird names include the Drab Seedeater, Common Loon, Noisy Scrubbard, Spangled Drongo, Rumped Bush Tyrant, Perplexing Scrubwren, Satanic Nightjar, Hoary Puffleg, American Coot, Fluffy-backed Tit-babbler, Horned Screamer, Blue-footed Booby, and the Yellow Bellied Sap Sucker. It might seem like whoever named these birds didn’t like them very much. 

The bird that first sets a birdwatcher on their path to birding is called their “spark bird” because it sparked their interest in the hobby. The Audubon Society’s Guide to North American birds is a good place to start learning about birds. It is available here and includes pictures of the birds along with the sounds they make. Happy birding! 


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