Summary Video: click here (3 minutes)
Fall is finally here! October kicks off the holiday season with Halloween, and markets have given us more tricks than treats in recent weeks. After a relatively smooth year preceded by the brief but volatile shock of the COVID-19 pandemic, markets are finally moving towards—dare we say it?—normalcy. Through it all, our core economic themes continue to drive market and economic outcomes... Inflation dominates Federal Reserve and investor concern. Expanded unemployment benefits were terminated. Interest rates ticked up towards the end of the third quarter. And, companies are performing well across the globe. All the while, COVID rages on, with Delta and other variants still threatening our livelihood. Mercifully, the virus is no longer ‘novel,’ and its pending shift from pandemic to endemic status marks the departure from a crisis event. Society has adapted, and while precaution must still be taken, operating in survival mode is no longer necessary.
Regardless of circumstances or time-period, markets always represent a tug-of-war. For every buyer, there is, by definition, a seller. What does one person know that the other doesn’t? Why is one person buying when the other is selling? The ‘smartest guy in the room’ is ALWAYS the market—not one person, or a group of prognosticators. This is why 994 Group leverages the wisdom of the market for investment performance, rather than trying to outsmart it. So, in line with historical averages, a pullback of 10%, or more, is expected every single year. Further, from 1926 to 2018, after the S&P 500® dropped by 10% or more, the next 12 months averaged 11.3%. So, where are we now?
Yes, there are both tricks and treats out in the economy. There is no period of time in history that didn’t incorporate both, yet we continue to move forward and pursue joy. In your financial plan, ‘threats’ in the family navigation chart are discussed; the things we cannot control. We cannot control inflation… we cannot control the pandemic… we cannot control the federal debt. (We cannot control the amount of candy corn we consume… wait…?) However, managing your financial plan through your risk appetite, cash flow planning, saving/spending strategy, and decision timing empowers you to achieve goals regardless of what’s going on in the economy and markets. So, stay focused on your family’s financial plan, and connect with us regarding any changes!
Sources: Dimensional.com, First Trust Monday Morning Outlook September 27th, Zacks Investment Management “Three Risks in the Coming Years” September 12, Fred.com “U.S. debt as a percentage of GDP over time,” Fred.com “Producer Price Index over time”, Blackrock Q4 2021 Equity Outlook
This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Past performance does not guarantee future results.
Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices do not account for any fees, commissions or other expenses that would be incurred. Returns do not include reinvested dividends.
Barclays U.S. Aggregate Bond Index: The Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index of fixed rate debt securities rated investment grade or higher by Moody’s, Standard & Poor’s, or Fitch rating services. All issues in the index have at least one year to maturity and an outstanding par value of at least $25 million to $1 billion based on the type of security. Indices are not available for direct investment and do not reflect any fees that may be charged.
S&P 500®: The S&P 500® index is an unmanaged index of 500 companies used as a representative sample of the United States economy. The S&P 500® index consists of only stock holdings. Indices are not available for direct investment and do not reflect any fees that may be charged.
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The Russell 2000 index is an unmanaged index of the 2000 smallest companies in the Russell 3000 index. The Russell 2000 Index is used as a representative sample of the small companies in the United States economy. The Russell 2000 index consists of only stock holdings. Indices are not available for direct investment and do not reflect any fees that may be charged.
The Russell 3000 index is an unmanaged index of 3000 companies in the United States. The Russell 3000 Index is used as a representative sample of the United States economy. The Russell 3000 index consists of only stock holdings. Indices are not available for direct investment and do not reflect any fees that may be charged.
 Investing internationally carries additional risks such as differences in financial reporting, currency exchange risk, as well as economic and political risk unique to the specific country. This may result in greater share price volatility. Shares, when sold, may be worth more or less than their original cost.
 Investments in emerging markets may be more volatile and less liquid than investing in developed markets and may involve exposure to economic structures that are generally less diverse and mature and to political systems which have less stability than those of more developed countries.