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“Raise Your Words, Not Your Voice. It Is Rain That Grows Flowers, Not Thunder,” Advised The Persian

The Markets 

Markets were shaken last week by a potent cocktail of central bank tapering and economic growth concerns mixed with coronavirus and a splash of the new Chinese privacy law. 

On Wednesday, the minutes of the United States Federal Reserve’s Open Market Committee Meeting were released. They confirmed the Fed could begin tapering – buying fewer Treasury and U.S. government agency bonds – sooner rather than later, reported Jack Denton and Jacob Sonenshine of Barron’s. While that wasn’t new information, investors startled like cats surprised by cucumbers, triggering a broad sell-off. 

In the United States, economic data was mixed. The U.S. Census reported that retail sales declined in July, suggesting weakening consumer demand. Normally, that’s not great news because consumer demand drives U.S. economic growth. However, with inflation at the highest level in more than a decade, lower demand could help relieve upward price pressure. 

Lower consumer demand was accompanied by improving supply. Lisa Beilfuss of Barron’s reported, “…business inventories rose in June at the fastest clip since October as wholesalers and manufacturers posted solid increases and retailers saw inventories rise for the first time in three months. From a year earlier, inventories across American businesses rose 6.6%, compared with a 4.6% pace a month earlier.” 

Of course, we could see supply bottlenecks again if a COVID-19 surge results in new lockdowns and continued worker shortages. 

Finally, on Friday, Chinese stocks dropped sharply after Beijing announced that a new strict data-privacy law will take effect on November 1, 2021. Investors remain concerned that China’s regulatory tightening will affect other market sectors, including fintech, gaming and education, reported Hudson Lockett of the Financial Times

“American investors’ shock at an ongoing regulatory crackdown in China points to a fundamental difference between the two countries,” reported Evelyn Cheng of CNBC. “…whereas the U.S. system is designed to let corporations influence the government, China’s system is designed to bring corporations in line with government goals.” 

Major U.S. stock indices finished the week lower. The yield on 10-year U.S. Treasuries finished the week where it started.

 


What Do You Know About Stock Markets? 

When people are fnancially literate, they have the knowledge and information necessary to make sound financial decisions. The 2020 TIAA Institute-Global Financial Literacy Excellence Center Personal Finance Index reported that more than half of U.S. adults understood borrowing, saving, earning and consuming, while less than half had a clear understanding of investing and risk. 

One common type of investment is stock. The stock market is where stock is issued, purchased and sold. Stockholders have an ownership interest in a company. Test your knowledge of stocks by taking this brief quiz. 

  1. What is a characteristic of a bull market?
    1. Stock prices rise
    2. Stock prices fall
    3. Investors are pessimistic
    4. None of the above 
  1. A stockholder is ______ who/that owns at least one share of a corporation’s stock.
    1. A person
    2. A company
    3. An institution
    4. All of the above 
  1. A person may be able to invest in a company by purchasing:
    1. Common stock
    2. Preferred stock
    3. Corporate bonds
    4. All of the above 
  1. What term is used to describe a stock market decline of 10 percent?
    1. A dip
    2. A correction
    3. A haircut
    4. A bath 
  1. List the following from highest risk to lowest risk:
    1. Emerging market stock
    2. 10-year Treasury bond
    3. 30-year investment-grade bond
    4. Savings account
    5. S. blue chip stock 
  1. Which of the following is a reason that a company might issue stock?
    1. Raise capital
    2. Transfer ownership
    3. Reduce debt
    4. All of the above 

If you have any questions about the answers, let us know.

 Answers: (1) A; (2) D; (3) D; (4) B; (5) A, E, C, B, D; (6) D


Best regards,

Yerba Buena Financial Partners

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Weekly Focus – Think About It 

“Keep your face always toward the sunshine - and shadows will fall behind you.”

— Walt Whitman, poet\

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   Andrew Zittell is a Registered Representative with and securities offered through LPL Financial, Member FINRA/SIPC.  Investment advice offered through Strategic Wealth Advisors Group, LLC a Registered Investment Advisor.  Yerba Buena Financial Partners and Strategic Wealth Advisors Group, LLC are separate entities from LPL Financial.


Our Sources, interest in reading more?  


https://www.goodreads.com/quotes/428038-raise-your-words-not-voice-it-is-rain-that-grows

https://www.federalreserve.gov/monetarypolicy/files/monetary20210728a1.pdf

https://www.federalreserve.gov/newsevents/speech/powell20210827a.htm

https://www.investopedia.com/terms/f/federalfundsrate.asp

https://www.bea.gov/news/2021/gross-domestic-product-2nd-quarter-2021-second-estimate-corporate-profits-2nd-quarter

https://lipperalpha.refinitiv.com/wp-content/uploads/2021/08/TRPR_82221_608.pdf

https://www.reuters.com/business/wall-st-week-ahead-blazing-us-stock-rally-faces-markets-toughest-month-2021-08-27/

https://www.barrons.com/market-data?mod=BOL_TOPNAV (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/08-30-21_Barrons_Overview_8.pdf)

https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield

https://gflec.org/wp-content/uploads/2020/04/TIAA-Institute-GFLEC_2020-P-Fin-Index_April-2020.pdf?x20437

https://www.investopedia.com/terms/s/stockmarket.asp

https://www.goodreads.com/author/quotes/1438.Walt_Whitman

https://www.investopedia.com/terms/b/bullmarket.asp

https://www.investopedia.com/terms/s/shareholder.asp

https://www.investopedia.com/articles/active-trading/111114/preferred-stocks-versus-bonds-how-choose.asp

https://www.investopedia.com/terms/c/correction.asp

https://www.investopedia.com/ask/answers/012815/what-assets-are-most-risky-and-what-assets-are-safest.asp

https://www.upcounsel.com/why-do-corporations-issue-stock

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