BAPI

All-Time Highs, Meet the Dog Days of Summer

"There are always flowers for those who want to see them." - Henri Matisse

July closed out six months of positive returns (S&P 500) with several indices reaching all-time highs. Despite the strength, headlines related to COVID variants, China regulations and peak growth pressured the reflation narrative and made for some volatile asset class moves. What should investors expect as we move through the dog days of summer?  

"The question is not what you look at - but how you look and whether you see."
- Henry David Thoreau

Shifting Narratives
The reflation narrative, born out of reopening economies and historic stimulus, helped power shares of economically sensitive companies higher after nearly a decade of underperformance. However, over the past several weeks, pandemic beneficiaries have outperformed reopening trades. Growth stocks have trounced value stocks, commodities have lagged, and Treasury yields, which peaked this year at the end of the first quarter at 1.8% (10yr), have moved steadily downward toward 1.3%.