• Onwards and Upwards: 56% of all analyst recommendations on S&P500 companies are “buy” or equivalent. This is the highest percentage of bullish recommendations since 2002. This seems to imply that despite the increase in delta variant cases and the Chinese regulatory crackdown, analysts believe the market has room to continue moving higher. Specifically, the aggregate 12 month price targets that analysts have published for the S&P500 implies an additional gain of around 10%.

• But Wait.... Interestingly, despite the bullish outlook of Wall Street analysts (as discussed above), the US consumer sentiment rating has fallen sharply to its lowest level in a decade. The drop showed that Americans (across all age, income, and educational brackets) are more worried about inflation, employment, and personal finances.

• Let's Hold Hands: Treasury bonds and the S&P500 have been moving higher together over the past few months. In fact, the iShares 20+ Year Treasury Bond ETF has gained 11% over the last 90 days while the S&P500 has risen 17%. This type of strong growth in both equities and bonds also occurred back in 2003, 2011 and 2020. In each of these three previous periods the S&P500 continued to rise by double digits over the next year.

• Instability and Crisis: As the Taliban rapidly re-take control of Afghanistan, investors are starting to worry about the increase in risk associated with investing in the country’s neighbor, Pakistan. Pakistan has a substantial equity market and a large public debt burden worth 90% of GDP, which they are only able to service through an IMF program. With an estimated 400,000 Afghans fleeing their homes this year, many worry that Pakistan will now need to deal with both a large refugee population and an increase in Taliban attacks. So far Pakistani bond prices have fallen nearly 8% this year.