Market Insights

Market Update – September 25, 2021

After a sharply negative start to the week, stocks rallied to finish higher. Concerns about the second-largest property development company in China becoming overextended by debt gave way to good feelings about the strength of the economy after positive comments from the Federal Reserve. For the week, the S&P 500 Index finished up 0.5%, while the Dow Jones Industrial Average rose 0.6%. Year to date, the S&P is up 18.6%; the Dow has gained 13.7%. First-time unemployment claims came in higher this week at 351,000, reflecting the labor market’s continued challenge to regain its footing. Continuing claims also rose, to 2.8 million. In U.S. housing news, new home starts and building permits issued rose in August, while sales of existing homes fell – likely due to the lower-than-normal inventory of homes available for sale.


Federal Reserve Chairman Jerome Powell conveyed confidence in the strength of the recovery this week via comments after the Fed’s policy meeting. By signaling that tapering of their bond purchases will likely start before the end of 2021 – and conclude by mid-2022 – he expressed faith that the economy is becoming more and more capable of thriving without extensive monetary support. Other worldwide central banks expressed similar sentiments, as countries such as Brazil and Norway raised short-term interest rates in first steps towards returning to more normal monetary policy regimes.


We continue to be positive on the outlook for stocks over the next 12-18 months, especially relative to bonds. Even given the Fed’s tapering guidance, the amount of worldwide monetary and fiscal support is substantial. Additionally, increasing global vaccination rates, strong GDP growth, and stock valuations (although elevated) maintaining their attractiveness over bonds are positive indicators for future stock performance. Although a certain level of volatility is always a part of stock investing, extensively large downturns are highly associated with economic recessions – an environment which does not appear to be on the horizon in the near future.


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