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Special Market Update - August 2021

July was dominated by headlines of the new and more contagious Delta variant of COVID-19 making its way around the globe, including the US. Like Michael Corleone lamented in the Godfather III, "just when I thought I was out they PULL me back in!"

In fact, on July 27th, the Centers for Disease Control and Prevention, in a reversal of its earlier position, revised guidance on wearing masks and is now recommending that even fully vaccinated people wear masks indoors in areas where the virus is circulating widely. This move comes as the highly transmissible Delta variant fuels a surge in cases around the country (including evidence of transmission by vaccinated individuals). Several cities - including Los Angeles, St. Louis, and tourism-centric Las Vegas - have reinstated indoor mask mandates.

WT Wealth Management believes a continuation of concerning headlines about the COVID-19 Delta variant potentially sets the stage for a bumpy stock market over the next several months. While Delta variant concerns cloud the near-term picture, our base case remains a rising stock market trend over the next six months, albeit with some additional volatility.

The most obvious investor concerns are that economies could be forced to close once again due to rising infection rates. At the very least, economic recovery could stall even if more moderate restrictions are reimposed. Many industries (i.e., travel, hospitality, entertainment and leisure) still have not fully recovered and further restrictions could be their death knell, along with their employees.

The Delta variant threat is also one factor contributing to falling bond yields over the past month to what some would call ridiculously low levels. For example, the benchmark 10-year Treasury yield reached 1.24% to end July, well below the 1.48% yield at the beginning of the month.

Traditionally, as the economy expands, the Federal Reserve raises interest rates and tightens lending conditions in an effort to curb inflationary pressures as demand for goods and services accelerates. Changing interest rates is one of the key tools the Fed can use to keep inflation in check. Yet today, the 10-year treasury rate is falling back towards its historic low at a time when the US economy is forecasted to grow 6-7% in 2021 and 4-5% in 2022. The Fed's response, or rather inaction, to this economic situation runs contrary to historic Federal Reserve behavior.

This inaction is explained by the fact that up to this point, inflation has been chalked up as largely transitory. After early "pent-up-demand" subsides, many economists feel inflation should abate and the Federal Reserve would then still be on target to achieve their dual mandate of full employment and price stability. If the Delta variant is merely a blip on the radar, but causes the Fed to remain unsure about future economic growth and the resulting economic recovery, they may just wait too long to act on inflation, hindering their ability to control it.

WT Wealth Management believes that the Delta variant will be managed and inflationary pressures will fade as pent up consumer demand dissipates and the Back-to-School and Holiday shopping seasons pass into history. We also expect vaccine adoption rates to continue improving globally. Conservatively, we will be in early 2022 by the time all of that comes to pass. Nonetheless, we forecast a steadily expanding economy, allowing the Federal Reserve to slowly increase rates.




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Any opinions expressed on this website are the opinions of WT Wealth Management and its associates only. Material listed on this website is neither an offer to buy or sell securities nor should it be interpreted as personal financial advice. You should always seek out the advice of a qualified investment professional before deciding to invest. Investing in stocks, bonds, mutual funds and ETF’s carry certain specific risks and part or all of your account value can be lost.

At WT Wealth Management we strongly suggest having a personal financial plan in place before making any investment decisions including understanding your personal risk tolerance and having clearly outlined investment objectives.

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WT Wealth Management is an SEC registered investment adviser, with in excess of $100 million in assets under management (AUM) with offices in Flagstaff, Scottsdale, Sedona and Tucson, AZ along with Jackson Hole, WY and Las Vegas, NV. WT Wealth Management is a manager of Separately Managed Accounts (SMAs). With SMAs, performance can vary widely from investor to investor as each portfolio is individually constructed and managed. Asset allocation weightings are determined based on a wide array of economic and market conditions the day the funds are invested. In an SMA, each investor may own individual Exchange Traded Funds (ETFs), individual equities or mutual funds. As the manager we have the freedom and flexibility to tailor the portfolio to address an individual investor's personal risk tolerance and investment objectives – thus making the account “separate” and distinct from all others we manage. An investment with WT Wealth Management is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Any opinions expressed are the opinions of WT Wealth Management and its associates only. Information offered is neither an offer to buy or sell securities nor should it be interpreted as personal financial advice. Always seek out the advice of a qualified investment professional before deciding to invest. Investing in stocks, bonds, mutual funds and ETFs carries certain specific risks and part or all of an account's value can be lost. In addition to the normal risks associated with investing, narrowly focused investments, investments in smaller companies, sector and/or thematic ETFs and investments in single countries typically exhibit higher volatility. International, Emerging Market and Frontier Market ETFs, mutual funds and individual securities may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability that other nations experience. Individual bonds, bond mutual funds and bond ETFs will typically decrease in value as interest rates rise. A portion of a municipal bond fund's income may be subject to federal or state income taxes or the alternative minimum tax. Capital gains (short and long-term), if any, are subject to capital gains tax. Diversification and asset allocation may not protect against market risk or investment losses. At WT Wealth Management, we strongly suggest having a personal financial plan in place before making any investment decisions including understanding personal risk tolerance, having clearly outlined investment objectives and a clearly defined investment time horizon. WT Wealth Management may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Individualized responses to persons that involve either the effecting of transactions in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption. WT Wealth Management's website is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of WT Wealth Management's website should not be construed by any consumer and/or prospective client as WT Wealth Management's solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the internet. Any subsequent, direct communication by WT Wealth Management with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. A copy of WT Wealth Management's current written disclosure statement discussing WT Wealth Management's registrations, business operations, services, and fees is available at the SEC's investment adviser public information website (www. adviserinfo.sec.gov) or from WT Wealth Management directly. WT Wealth Management does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to WT Wealth Management's web site or incorporated therein, and takes no responsibility therefor. All such information is provided solely for convenience purposes and all users thereof should be guided accordingly.

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