Moore Financial Solutions Second Quarter 2021
Tyler Moore • July 14, 2021
The second quarter of 2021 showed strength in equities with the S&P 500 being up each of the three months. The United States equity markets rallied to go three for three, while keeping a close eye on inflationary drag on companies and a historical supply chain issue from Covid-19. The monthly returns of the S&P 500 this quarter were 5.24% in April, .549% in May and 2.22% in June. The U.S. and global economy faced supply chain issues ranging from the inability to physically get shipping containers, to a boom in commodities, such as the well documented surge in lumber prices and labor shortages. One thing seemed clear; the American consumer continued
to spring back from the Covid-19 lull of spending. This quarterly report will review aspects of Q2 regarding supply chain issues, Federal Reserve discussions, interest rates, the Delta Variant, and discuss projections/strategies moving forward.
As the second quarter of 2021 continued the post COVID recovery process, many consumers continued to spend after months of savings. This V-shaped global recovery created an imbalance between consumers and suppliers. This results in price fluctuation. The U.S. and other global economies lack the ability to be highly maneuverable. Instead, these economies take months, if not years, to ramp back up after such uncertainty from the pandemic. After years of demanding smart technology in what seems like everything we use, there has been an increased demand in computer “chips” (to oversimplify). The great 2021 chip shortage, as well as other materials/labor shortages, have created a new phenomenon of “depreciating assets” having appreciated, such as trucks, machinery, equipment, etc. We use this as an example of the impact global supply chain issues can have on our everyday lives.
At Moore F.S., we believe U.S. equity market investors had a close eye on the Federal Reserve and their intentions regarding interest rates and the purchase of securities on the open market. It is our belief that the Federal Reserve will make policy change in some form within a
year or two. Jerome Powell seemed to thread the needle and calm U.S. equity investors’ nerves this quarter with gentle language surrounding the subject of policy change. The Federal Reserve is eyeing the strategy of slowing their purchase of assets on open markets. These purchases essentially add money into the economy and have a quantitative easing effect on our economy. This easing strategy was implemented in the recovery of the great recession and have not fully been discontinued. Investment allocation strategy, especially for more conservative investors, becomes paramount during these times of potential interest rate changes. Moore F.S. bond portfolios favor high quality limited duration bonds, along with other bond types.
Interest rates decreased within the second quarter of 2021. The U.S. Ten Year Treasury note started the quarter with a yield of 1.745% and ended the quarter at 1.469%. In the opinion of Moore F.S., this slight decrease was a result of the overshot of interest rates in March, a month that saw a .33% increase of yield from 1.415% to 1.745%. Additionally, the Federal Reserve strongly sent the message that interest rate increases are not immediately on the horizon. This decrease of rates had a positive impact on the price of bonds. As interest rates fell, the bonds Moore F.S. held appreciated in value, because it became harder for investors to find new bonds paying that higher yield. The iShares 20+ Year Treasury Bond ETF TLT can illustrate this with a Q2 appreciation of 6.57%, moving from a starting value of 135.45 to 144.35 per share. This 6.57% increase in TLT paired nicely with an 8.06% increase in the iShares Core S&P 500 ETF IVV for the quarter. The IVV remains the largest holding of Moore F.S. for Q2 2021. Generally, bonds and stocks may have an inverse relationship, but a decreasing interest rate for the second quarter was a broadly favorable event for investors of both equity and debt holdings. The reduction of interest rates helps potentially increase the margins of companies, then reflects in the share price. Additionally, falling interest rates lead to an increase in the current price of bonds within a portfolio.
Lastly, we believe the Delta Variant of Covid-19 kept U.S. equities from hitting the thrusters with more emphasis. We seem to have lived through so much in the last couple years that it is without surprise that we are not fully in the clear from this mutation. The Delta Variant continues to spread globally and seems prevalent within the Midwest. The uncertainty of how rapidly this variant can spread and how effective current vaccines are will continue to be a key focus in our lives and within equity and bond prices.
Looking forward, Moore F.S. believes the recovery is on, and investors and consumers are willing to continue a path to more spending and higher equity prices. We remain highly invested in the United States equity markets, when appropriate for investors, and continue to be invested lightly into what we consider recovering assets, such as the cruise lines. For investors that can tolerate risk and exposure to volatility, we see Small Cap U.S. equities leading the trend higher over the next few years with much uncertainty in interest rates to potentially influence this trade. We see many of the supply chain issues being resolved in the next 9-15+ months, depending on the industry and sector of the economy.
I remain committed to managing every portfolio in a unique and personalized manner while individually trading each account. It is with great pride I continue to work with you on your financial goals and bring you the most efficient and cutting-edge portfolios and tradability. I continue to manage your goals and dreams, not simply your stocks and bonds. Moore F.S. continues to strive to use high quality companies with ideal earnings, generally speaking. On a personal note, within the second quarter of 2021, my wife, Samantha, and I welcomed second our daughter, Harper, into the world and things have mostly returned to normal within the Moore F.S. schedule and visiting with clients. As always please reach me personally if you have any questions or if I can help you. I remain committed to steering Moore F.S. in the direction of being as efficient and competitive as the largest firms, while providing strategic and personalized service you would find within the smallest of organizations.
Tyler A. Moore
As 2025 ends, we joyfully review another positive quarter for the S&P 500, with it logging about a 2.3% gain, plus dividends (1). Much like a banked 3-pointer in a game of basketball, we won’t complain about scoring points, even though it may not have looked pretty, with extreme volatility near April (and again seven companies creating a large portion of gains.) Realistically, the annual return of 16.39% on the S&P 500 for the year is great, especially when it follows 24% and 23% returns the prior two years (2).However, we take exception to the continual heavy lifting done by the “Mag 7” (Google/Alphabet, Nvidia, Microsoft, Tesla, Meta/Facebook, Apple, and Amazon) as they now make up nearly 35% of the S&P 500. The other 493 stocks making up the S&P 500 represent the other approximately 65% of the index and only returned approximately 10% for the year. I will discuss much more on this and how Moore F.S. has attempted to mitigate some of this Mag 7 risk. Additionally, we’ll discuss interest rate movements along the yield curve, the Federal Reserve, and share our most recent trade and strategy for 2026. More than likely “Mag 7” is a phrase you’ve heard of. Naturally, some of you have not heard of the financial term Mag 7, so perhaps the only thing coming to mind is the 1960 movie The Magnificent Seven. In today’s world Mag 7, as mentioned above, refers to some of our largest publicly traded companies in the United States. Not by coincidence, each of these companies are all using Artificial Intelligence (A.I.) in some way. This ranges from Microsoft being extremely involved, Nvidia the A.I. hardware backbone, to Tesla using moderate adoption for self-driving. Our view is that the recent run up in big tech likely is merited, with J.P. Morgan recently offering, “the advent of generative AI is a seminal moment in tech, more so than the Internet or the iPhone (3).” With some offering such a bullish viewpoint on the Mag 7 we do not fear investing in it for the appropriate client. But, with the Mag 7 having about a 29 price to earnings ratio (read MFS Q1 ’24 review to learn more about how we use P/E ratios) and the other 493 stocks that make up the index having a P/E ratio of only about 20, we believe the time has come to reduce our exposure to Mag 7 holdings. We consider it our foremost goal to balance risk. By taking a risk/reward analysis approach, we believe the value is in the 493, but we are not abandoning the Mag 7 holdings.
With many asset classes moving higher in Q3 we hope you were able to take advantage within your account! I’m pleased to be able to review an S&P 500 that was able to maintain a generally upward trend since April 8th, 2025, a day that would not so ironically be the only closing price below 5,000 so far this year, an important statistic we will discuss in greater detail later. As investors weighed a decreasing rate environment in which the Federal Reserve reduced rates, and a weakening labor market, the S&P 500 logged a 7.79% increase (1). Fixed Income rallied with the Moore F.S. largest bond holding (iShares 20+ Year Treasury Bond ETF) increasing about 1.27% within Q3 (as of 09/30/25) and paying another nearly 1% dividend for the quarter (2). With stocks and bonds rallying together over the last quarter, I’ll discuss market moving events within the quarter, lay out my opinion of how investors can consider deploying capital in a highly valued market, provide trading ideas, and discuss our thoughts on why U.S. markets are priced at a premium globally. Tasked with fiduciary* management of hundreds of accounts, Moore F.S. is always strategic about your investment holdings, and attempts to strike a solid balance of risk and reward within each account. The gray-haired veteran’s account looks far different from the client born this side of the new millennium. To support this strategy, we believe that interest rate policy and trajectory can be the easiest variable to monitor regarding the decision making of portfolio construction, which Moore F.S. is proud to do “in house”, instead of using high-cost mutual funds for example. This Exchange Traded Fund oriented strategy typically results in the older client’s asset allocation being constructed of stocks and bonds strategically, and the client of the “new millennium” hosting strategy that is more related to the capitalization of stocks. In other words, in the average environment, Moore F.S. tilts younger portfolios more to small caps (using smaller companies instead of the large ones like you’ll find in the S&P 500). To oversimplify, Moore F.S. set portfolios up to help them better perform when rates fall. We feel strongly that the active management of passive ETF’s can help ensure you’ll have solid asset allocation without using actively managed mutual funds which typically lag.
