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July 2021

Dear Clients and Friends,

Markets spent the second quarter of 2021 obsessed by inflation. The past year brought the economy an abrupt shutdown. That shutdown nicked supplies of almost everything - from reductions in the building of homes to occasionally empty grocery shelves. As economies have reopened, consumers have rushed back in forcing businesses to scramble to bring their supplies back online. The surge in demand while supplies struggle to recover has sent prices upward - ergo inflation. Since inflation rates are typically measured as growth in price from the prior year, some inflation statistics are misleading. Prices during the pandemic cratered setting an unusually low bar against which current prices are compared. Have you tried to rent a car this summer? The chart below shows prices have doubled from last summer's level. Of course, last summer rental cars were languishing as travel was way down. Rental prices then were unusually cheap.

Free government money lined the pockets of some consumers. Home-bound consumers, largely unable or unwilling to travel, go to restaurants, and pursue their usual discretionary spending habits instead spent money on cars, houses, and everything available online. This spending behavior pushed up the price of houses and cars to record levels. Workers in some industries have been slow to return to work pushing up wages. These factors have sent the inflation rate to its highest level in three decades.

The Federal Reserve's stated view has been that this inflation is temporary and will recede as supplies adjust to support the demand. That seems possible. After peaking in April, prices of lumber and copper have dropped back, in some cases sharply so. Labor trends show initial signs of adjusting as restaurants, movie theaters, and other entertainment options reopen. Come September, universities and schools will broadly be back in person while 'extra' unemployment benefits stop; both factors are expected to generate a dramatic shift in the economy's return to normal.

While the headlines throughout the quarter highlighted inflation, interest rates were believing the Fed. After surging higher in the first quarter, interest rates spent the second quarter easing back below pre-pandemic levels. Some of this decline likely relates to diminished expectations for the size of future government stimulus. However, the downward tilt to rates also tells us that expectations for inflation are diminishing.

The up and down expectations for inflation drove a wildly shifting environment for stock investors. The high growth "FANG" stocks (Apple, Facebook, Amazon, Google, etc.) were all that investors wanted during the pandemic as their businesses are well-known, growth rates stable, and stocks viewed as less risky. Once vaccines became available, howeve, investors shifted quickly to "re-opening" cyclical stocks in financial, materials, and industrial sectors. As inflation fears abated in the second quarter, markets shifted yet again, rushing back toward the high-growth stocks.

This turbulence among the sectors has not impacted the overall market much, as the broad market indexes have inched upward. The S&P 500 has now gone eight months without a -5% pullback, an exceptional period of calm. That will likely change as the calendar turns to the third quarter. Though July is typically kind to stock investors, August brings a major Fed meeting. The central bank will likely announce reductions in stimulus measures enacted during the pandemic. Then, September is notorious for being the worst month of the year for stocks, on average. We think the stock market environment ahead will bring more turbulence. Our focus on risk helps us during these periods of volatility allowing us to provide your accounts a continued smooth ride.

To future profits,

Don Lansing
Chief Investment Officer.

Garrett Beauvais
Portfolio Manager

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Thank you for your time and interest!

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About MarketTrend Advisors

MarketTrend Advisors is an investment advisory firm that specializes in the trend-following strategies outlined in this report. We offer a variety of strategies that can be used to build portfolios to meet almost any investment objective. We divide our strategies into two main groups: "Long" strategies and "Trend" strategies. The Trend strategies follow the trend up or down. The "Long" strategies are typical investment portfolios that usually remain fully invested, potentially raising cash or moving to income-focused investments when the market is weak. We have a variety of "Long" strategies depending on how aggressive or conservative you want to be. These strategies will make their money when the market is moving higher. The "Trend" strategies will provide protection in a down market and add to gains in an up-trending market. By combining the Long and Trend strategies you get all the components needed to build a successful long-term portfolio:
  1. A portfolio invested in the best performing indexes, ETFs, or stocks
  2. Substantial exposure to global growth through international holdings
  3. Protection for your overall portfolio from down-trending markets When the market is going up, you benefit as aggressively as you wish.
When the market is going down, your assets are protected, or even profiting. Over time, you will see returns that exceed the market if only by AVOIDING market corrections and bear markets. By using one of our more aggressive long strategies in an uptrend, you will see even better performance.

  1. MarketTrend Advisors, Ltd. is an independent registered in the States of California, Florida, New York and Texas.
  2. Other Securities Industry Affiliations or Activities. MarketTrend Advisors, is not registered as a broker or dealer, nor do we have any partners or employees who are affiliated with any broker or dealer. See Form ADV, Part II for official declarations.
  3. MTA portfolio strategies assume risk and no assurance is made that investors will avoid losses. No representation is made that clients will or are likely to achieve profits or incur losses comparable to those shown. Performance results are shown for illustration and discussion purposes only. The performance information has not been audited. However, the information presented is believed to be accurate and fairly presented. All performance figures in this presentation are net of management fees and commissions. Management fees are charged to actual client accounts on a monthly basis. Accounts include both taxable and non-taxable IRA accounts.
  4. Regarding the MTA Blend strategy: This strategy was migrated into the MTA Wealth Builder strategy and closed in December 2008.
  5. Regarding actual performance: Actual performance for all strategies includes all commissions as well as management fees (fees range from 1% to 2%). Actual performance statistics are based on the inception date of each strategy through the end of the last business day of the most recent month listed in the monthly performance section of this report. Starting with Q4, 2006, returns include only assets of Fidelity clients who were fully invested in their respective strategies. Returns before Q4, 2006 include all Fidelity client assets regardless of investment status. Results do not include the assets of clients at other brokerage firms.
  6. Regarding future performance: Past performance may not be indicative of future results. Therefore, you should not assume that the future performance of any specific investment or investment strategy will be profitable or equal to corresponding past performance levels.
  7. S&P 500 refers to the Standard & Poor's 500 Large-Cap Corporations Index. The index is designed to measure performance of the broad based US market and consists of 500 American companies. This index is used for comparative purposes only. (Data is taken from Yahoo! Finance.)
  8. MarketTrend Advisors is not liable for the usefulness, timeliness, accuracy, or suitability of any information contained in its web site or of any of its services. The user understands that the information given can and will fail to predict the direction and magnitude of market price movements and the user can lose money when using this information.
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