Index	3rd Quarter	1 YR
S&P 500 Large Cap Index	0.23%	28.09%
S&P Small Cap 600 Index	-3.14%	55.70%
S&P Developed BMI International Index	-0.79%	28.30%
S&P U.S. Aggregate Bond Index (total return)	0.11%	-0.55%
S&P Municipal Bond Index (total return)	-0.26%	2.71%
Dow Jones Equity All REIT Index	-0.41%	27.70%
Dow Jones Commodity Index (total return)	3.08%	44.93%

SOURCE: DOW JONES, DATA AS/OF 9-30-2021 (DOESN’T INCLUDE DIVIDENDS UNLESS NOTED). HERE IS A COMPREHENSIVE LIST OF RETURNS.

So, What Took Place?

In Q3 2021, we saw the market making new highs in early September, just prior to cooling off later in September. And to put in perspective how quickly the market moves, in the last hour of the last trading day of September, the markets lost ~ .75%. That was quick!

Equities held up fairly well over the past three months, despite concerns of a slowdown in economic growth, supply disruptions, and rising inflation. Many “experts” still believe that despite a moderation in the pace of growth, recession risk is relatively low. Expectations for earnings growth in future years have helped support equity markets.

Equities also proved to be pretty resilient in the wake of Covid hospitalizations that took place over the quarter across a number of countries. It’s also encouraging to see signs that this has peaked (for now) – only time will tell.

In other global news, Chinese equities struggled as they faced a relentless stream of negative news. Rightly or wrongly, they dragged down emerging markets as well. 

In the US, the Fed remains under the microscope for how they handle inflation and interest rates in the coming years. The yield on the 10-year bond did finish above 1.50% for the first time in a while, a sizable jump from the low 1.17% levels in July.

The Financial sector was the best performing sector of Q3, making that four strong quarters in a row coming out of last year’s pandemic dip. The Energy sector has added on to their recent run, as crude oil prices hit levels not seen since 2014. Other strong sectors were technology and real estate, while materials and industrials lagged behind.

Other Thoughts

Over the past few weeks, medical news regarding Covid has been improving. Specifically, new case growth (on a 7-day-average basis) was down by one-third during the month of September.  Positive test rates were down by a similar amount as were hospitalizations. You may not know because these events did not dominate global headlines. Still, it was a nice bit of upbeat news elbowing its way in through the usual crisis-driven clamor.

Of course, there’s plenty to be concerned about. In the U.S., trillion-dollar budget proposals rise and fall. The debt ceiling hovers in balance. Immigrants press at the borders and inflation waits in the wings. Around the world, there’s heartbreaking news coming out of Afghanistan, China’s Evergrande is on the brink of failure, and repercussions of climate change loom ever larger.

Throughout, markets have continued to deliver relatively strong returns year to date. But not unlike the good things that happen in everyday life, this news has been wedged in between the usual bounty of mixed messages.

As this Wall Street Journal quarter-end wrap-up  reported, “All told, the S&P 500 is still up 15% for the year and managed to squeeze out a sixth straight quarter of gains.” But this larger view arrives several paragraphs in, after leading with the more attention-grabbing news: “Markets tumbled to end the quarter, sending the S&P 500 to its worst monthly pullback since the pandemic-fueled selloff of March 2020.” Gotta love today’s media!

It’s typical to think of capital markets as nothing more than constructions for conducting commerce and making money. That they tend to do over time. But markets are made of people, in all our messy glory. This means the close-up view can be equally as messy. This, in turn, tempts reporters and consumers alike to focus on bold, breaking news that seems to matter, instead of the bigger picture.

As a recent Farnam Street columnist observed (it’s a great 6 minute read called “Why You Should Stop Reading the News” and I highly recommend):

“News is, by definition, something that doesn’t last. It exists for only a moment before it changes. … It’s not important to living a good life. It’s not going to help you make better decisions. It’s not going to help you understand the world. It’s not dense with information. It’s not going to help you develop deep and meaningful connections with the people around you.”

Looking Ahead

Clearly, winter brings with it some uncertainty in relation to Covid’s potential impact on health systems. But even if hospitalizations do start to pick up again, I’d expect the economic recovery to be delayed rather than derailed. This is thanks in part to the very healthy savings balances that consumers have accumulated. These elevated savings, along with solid wage growth, should also help most consumers to weather the increase in prices currently underway.

I believe that there’s value in savoring life’s fleeting moments. But their “news” is of a different nature. When new information helps us reimagine the ordinary, it can elevate our world view. It grants us the gift of connecting with others who can offer a different perspective. It can even stretch time and reach across generations to create enduring legacies.

This is what we wish for you and your family—this and every quarter. Please continue to reach out to us whenever we can help you realize your own family’s greatest goals in a world that never stops spinning.

Brandon

Disclaimer: This information contains forward-looking statements about various economic trends and strategies. You are cautioned that such forward-looking statements are subject to significant business, economic and competitive uncertainties and actual results could be materially different. There are no guarantees associated with any forecast and the opinions stated here are subject to change at any time and are the opinion of the advisor. The information should not be construed as legal, tax, nor investment advice. Never make investment or financial decisions based on information provided here, without first consulting with your professional investment advisor. Data comes from the following sources: Census Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis, the Federal Reserve Board, and Dow Jones. Data is taken from sources generally believed to be reliable, but no guarantee is given to its accuracy.