Third Quarter 2021 Market Newsletter

Markets

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MARKET NEWSLETTER EXECUTIVE SUMMARY

Stocks had mixed performance in the third quarter of 2021. US stocks of large companies rose marginally but stocks of smaller companies and foreign stocks fell.

The US economy has hit a speed bump because of uncertainty from Covid, fiscal policy, debt ceiling negotiations, supply chain bottlenecks, inflation fears, monetary policy, and labor market abnormality.

Consumer and corporate fundamentals are solid and should support a recovery.

US corporate earnings growth could clock in at over 30% for the third consecutive quarter.

S&P 500 valuation (Price divided by earnings expected over the next 12 months), is currently 20.5, which is higher than the 25-year average of 16.8 but below its recent high of 22.

Investors should neither take too much risk nor be overly conservative when markets are strong and making all-time highs. All-time highs are not necessarily followed by a bear market. On the other hand, when bear markets arrive, they lead to deep declines in stock performance that last for a significant time. To achieve long term success reliably, they should create well diversified, robust portfolios in line with their objectives and stay invested for the long term.

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