How to Analyze Today’s Stock Market Report
Many factors are at play as we look to analyze today’s stock market report. In September, the tech-heavy Nasdaq index dropped 5.3%, and the S&P 500 fell 4.8%, which was their most significant monthly drop since March of 2020, when Covid was shutting down the economy. In addition, investors are currently stressing about the debt ceiling debate, the fate of a $3.5 Trillion government spending package, sharply rising interest rates, the Federal Reserve plan to taper their Quantitative Easing, increasing Covid infections in some states, and runaway inflation (Source: https://www.cnbc.com/2021/09/29/stock-market-futures-open-to-close-newshtml.html).
Our portfolios outperformed the indexes because of our trading and sector selection, but we sustained losses. Please review your statements and call us if you have any questions or further discuss our strategy. Since making the changes to our research process on April 1st this year, which includes trading less frequently, we have seen good numbers.
A “Scary” Season for the Market?
As we have been predicting for months within our market commentaries, the market has taken a breather. According to the Stock Trader’s Almanac, seasonally, September is one of the weakest months for the stock market. Conversely, October tends to be positive, while November until April is the seasonally most vital period for the stock market each year. As a result, we are optimistic that recent market performance is a bump in the road, but brighter days are ahead.
More to Consider About Today’s Stock Market Report
At this time, we are viewing the recent stock market drop as a buying opportunity as we are optimistic about the fall and holiday shopping season. Here is an updated list of our reasons to be optimistic, despite short term volatility:
1. President Biden and congress appear to be getting closer to a bipartisan infrastructure plan that would include $3.5 billion in new spending. He is also open to not raising taxes on corporations as previously planned. Since the assumption today is that taxes would increase, this is a positive development. In addition, this could be a tremendous stimulus for the stock market between the additional spending and pause on corporate tax increases.
2. While there is a lot of concern in the medical community about the new Delta variant, we have received some good news recently. Drugmaker Merck announced today that their experimental Covid-19 pill reduced hospitalizations and deaths by half in newly infected people with the Coronavirus. They plan to request approval from the US and world health officials to approve its use. All Covid-19 therapies currently available require an IV or injection, so people could potentially treat Covid-19 at home moving forward.
3. Corporate profits are calculated year over year. In the last three months, corporations reported their earnings increases for 2021 versus the Covid ravaged 2020 numbers. At one point, the year-over-year growth in earnings was 105%! We continue to expect good numbers when the Q3 earnings season begins because of the easy year-over-year comparisons. (Source: https://www.nasdaq.com/articles/the-3-most-notable-features-of-q2-earnings-season-2021-08-06)
4. The Federal Reserve has been printing money and buying investments with it, commonly called Quantitative Easing. This is very accommodative to investors and is one of the reasons the market rebounded last year after Covid first hit. We are watching the Federal Reserve and the Federal Government for signs that they will tighten the money supply, most likely before year-end, as that will likely influence the markets.
5. Demographics will continue to be a tailwind for the next 15-20 years, the same way the stock market roared up in the 1980s and 1990s. Generation X is firmly in its peak spending years, and the Millennial generation (which is larger than the baby boomer generation) is entering its peak spending years. When we study this data over hundreds of years, we find that a country with a significant portion of its population in peak spending years is very good for the economy and stock markets. As a result, we believe this tailwind will aid the stock market in 2021 and years to come.
We are Here to Help
Because of these optimistic points, we hold stock positions in our portfolio. If you’d like to discuss how your portfolio is positioned from a risk standpoint, please reach out to us right away. In addition, if you’ve had any changes to your income, job status, marital status, 401K options, address, or any other financial changes, don’t hesitate to get in touch with the team at Summit Financial today. We will continue to monitor your investments and do everything in our power to protect and grow your accounts.
Bob, Ken, Jim, and Zach
Note: Please update Summit Financial Consulting LLC if your investment objectives have changed or if the personal or financial information previously provided has changed. The investment advisory disclosure document that describes Summit Financial Consulting’s investment advisory services account is provided to you annually. Please consult Summit Financial Consulting for a copy of this document should you need an additional copy.
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