Equity markets finished notably higher Tuesday, rebounding from Monday’s sharp sell-off sparked by rising concerns of the spreading delta variant.

Global markets were mixed, with Asian equities weaker while European stocks traded slightly higher.

There was a positive cyclical tilt to the gains, with small-caps along with industrials and financials leading today.

Bond yields reversed an early slide, moving slightly higher after Monday’s sharp drop, with the 10-year rate climbing back around the 1.2 percent mark.

That said, with rates still historically low, it appears, for now, that growth concerns are outweighing higher inflation in the bond market.

Housing starts rose 6.3 percent in June versus the prior month, a much stronger-than-expected gain as new construction rose to the highest level since March.

We suspect the pullback in lumber prices, increased labor supply, and the decline in interest rates all contributed to June’s jump.

The housing market has been red hot, and while we don’t think the pace of home-price increases will be sustained indefinitely, we do think housing-market activity will continue to be robust, supported by continued improvement in the labor market as well as ongoing shifts in urban migration and work-from-home trends.

A healthy housing market often accompanies positive consumer spending, which should be favorable for economic growth ahead.

Quarterly earnings announcements remain near center stage this week.

IBM’s earnings after the bell on Monday set an encouraging tone, adding to the solid results from the big banks as they kicked off earnings season last week.

Cryptocurrencies such as Bitcoin, as well as other high-flying speculative investments, have sold off recently as the outlook for global growth and Fed stimulus has shifted.

With a host of bellwether S&P 500 companies scheduled to release earnings results this week, we expect markets to key in on the prospects for profit growth ahead.

After sharp gains in the first half of the year, the shifting economic and policy backdrop could, in our view, be a catalyst for quality over speculation, favoring companies with the most solid earnings outlook and prospects for sustained growth.

We think a balanced approach to asset-class and sector diversification can position portfolios for this environment.

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