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2021 3rd Quarter Market Updates

October 21, 2021
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Let’s talk about what’s been going on in the stock market recently. Looking back at September 2021, we had a 5% pullback, so you’ll see on your statements showing you the values of your portfolios that there was a pullback, and we all lost some money. Going forward there may still be some volatility however, we expect a rebound to happen in October and going on forward.

When we see more volatility, it is helpful to really dig into the indicators to get a feel for the big picture. In my latest video blog update I highlight:

  1. Understanding market corrections
  2. Stock market performance by economic cycle
  3. Looking under the hood at the S&P 500
  4. Indicators of a bear and bull market cycles

Transcript

Wow, here we are late 2021 and I’m going to give you a market update and a little bit of an outlook for the rest of the year so let’s get started.

{Intro Video}

Hey guys. Doug Pardieck with Talon Wealth Strategies, certified retirement counselor, financial advisor. Okay, so let’s talk about what’s been going on in the stock market recently. Looking back at September 2021, we had a 5% pullback so you’ll see on your statements when you get those showing you the values of your portfolios that there was a pullback and we all lost some money, but we expect the rebound to happen here in October and going on forward. But there will be some volatility.

Let’s talk about market corrections. They are normal. It’s a 5% pullback or greater and take a look at the history here. This chart is showing you the stock market from 2009 to 2019 so we have ten years of history. During those ten years we had 21 pullbacks or corrections of 5% or more. So, just know that they are normal, they happen and it creates a buying opportunity. When prices come down and you want to add more shares of a good investment, it’s a good time to buy. Just know that corrections are normal. We’re going to see them two to three to four times per year. This year so far in 2021 we’ve only had one correction so there may be more to come.

Let’s now talk about the business cycle. So Fidelity, my friends over there sent me this chart. According to their calculations and their math they believe that the U.S. is in the early to mid-part of this economic cycle. What’s important to know about this is the stock market tends to do very well during this phase of the economic cycle. Take a look at stock prices shown in green, U.S. stocks. The average annual return looking back from 1950 to 2020 is just under 50% return. Right now this year looking at this chart, large cap stocks, which is a good indication of U.S. stocks here in the United States, up almost 16% year to date.

Now, there is something you should know. When you look underneath the hood at the S&P 500, the index looks really good, double digit returns. But a lot of stocks over the last quarter have dropped more than 10%. So, there’s a lot of stocks out there not getting these 16% returns, but these indexes – the Dow Jones, the NASDAQ, the S&P 500. Overall, they look good but do know that there’s a lot of stocks, especially growth tech stocks, have really pulled back sizably. If you have a lot of exposure to those growth tech stocks that did so well in 2021, a lot of those were down 7% to 8% to 9% in September alone.

All right, so take a look back at 2020 on this chart. The stock market did very well last year and also in 2019. So when we have these above average returns there’s a consequence for that. We tend to have below average returns in the following years. So, we’ll keep an eye on that.

Another thing I want to show you is the stock market goes through cycles. They’re called bear market cycles or a secular bear market and a secular bull market. Take a look at these red and green lines. The red circle is a secular bear – bad returns. The green line is secular bull market – nice long returns. They do have volatility along the way but those are periods of really good increases in the stock market, increases in your portfolio values. And right now we are absolutely in a secular bull market. And how long can that last? Well, there are some ingredients starting to show up in the data that suggest that the end of the bull market is going to come in the next few years. We’re watching that. We don’t know if it’s a year away, two years or three years but we’re watching the data and we’re keeping our eye on it. We’ll be talking more about that in future videos.

What we’re looking at right now is corporate earnings and they’re expected to rebound and do very well in 2022. Take a look at this chart. It’s showing you what the estimates are going into the latter part of 2021 and into 2022. The lines have been going up gradually over the last several years and we expect them to start to come back down to that normalized rate, the average return. We’ll take a look at this but right now corporate earnings are going to be looking probably pretty good late 2021 and early 2022. And this is a good sign for the stock market.

Okay, so we’ll stop there. If you have any questions about your portfolio, about the investments, how we can help you, we’re here to help. Again, Doug Pardieck with Talon Wealth Strategies. Have an awesome week and we’ll see you soon. Take care.