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Q3 2021 Market Recap

October 12th, 2021 | Written by

The market had a mixed quarter as the S&P finished up only 0.58%. Strong performance at the end of July and in August reflected strong 2Q21 earnings that were broadly above expectations and economic data that showed continued progress despite concerns over the Delta variant. However, the market sold off in September as investor nervousness grew amid concerns over rising interest rates, the impending debt ceiling, broadening inflation and supply chain concerns, and debt issues in the Chinese property market. Yields rose as the Federal Reserve slightly raised its inflation forecast, some Federal Reserve members pulled forward rate hike expectations, and the market appeared modestly surprised by the projected timeline of the Federal Reserve’s asset tapering.    

Large cap outperformed small-cap stocks in 3Q21, Large growth stocks continued to perform well following 2Q21 earnings, a spike in delta variant COVID cases, and the market wrestling with a potentially more aggressive Federal Reserve and the implications on projected economic growth. 

International developed markets slightly lagged U.S. markets and emerging markets materially underperformed as spikes in Delta variant cases hampered growth and Chinese debt concerns significantly weighed on emerging market returns.  

Economic indicators still point to a favorable future environment in 2022, but short-term concerns such as broadening inflation metrics that could be exacerbated by returning supply chain and shipping logjams, supply-demand mismatches in the labor market, and the debt ceiling debate have led the market to dampen growth expectations for the second half of 2021. 

We think investors should be prepared to see increased volatility in the near-term, but we still believe equity markets should produce solid overall returns in the medium- to long-term.  We continue to look, and are prepared to deploy capital, into attractive investment opportunities, but we think taking a long-term view by maintaining a balanced and well-diversified investment approach is critical for producing superior risk-adjusted returns.   

Index 3rd Quarter 2021 Year-to-Date 
Dow Jones Industrial Average -1.46% 12.12% 
S&P 500 0.58% 15.92% 
Russell 2000 -4.36% 12.41% 
Bloomberg Barclays U.S. Agg Bond 0.05% -1.55% 
MSCI EAFE Index -0.35% 8.79% 
MSCI EM Index -7.97% -0.99% 

Sources: Y Charts

Data as of September 30, 2021. Past performance cannot guarantee future results. 

 

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