Markets Struggle in the Third Quarter
Global equity markets had a mixed third quarter, but when the final Wall Street-bell rang on September 30th, global markets had not moved very much, despite the final month of the quarter which turned in dismal results.
For the third quarter of 2021:
- The DJIA ended with a loss of 1.5%.
- The S&P 500 ended up 0.6%.
- The NASDAQ ended with a loss of 0.2%; and
- The Russell 2000 ended with a loss of 4.4%.
In spite of the mixed returns for the third quarter and the dismal September returns, most investors are instead focusing on how the market performed for the first nine months of the year – and those numbers are solid.
- The DJIA is up 12.1%.
- The S&P 500 is up 15.9%.
- NASDAQ is up 12.7%; and
- The Russell 2000 is up 12.4%.
Interestingly, the themes that helped drive market performance during the third quarter have been on Wall Street’s worry list for a while. Topping those concerns are rising inflation, declining consumer sentiment; an overheating housing market; concerns that the Delta Variant might stall economic activity; and disappointing economic data, which has been hampered by supply chain issues.
Furthermore, we saw that the overall stock market volatility trended up in the third quarter. Although oil did not move much in the third quarter, it has climbed more than 50% in the last six months.
Market Performance Around the World
International investments did poorly too. Thirty-two of the 35 developed markets tracked by MSCI, the international benchmark, were negative for the third quarter of the year.
Inflation Keeps Rising
The Bureau of Labor Statistics reported that the Consumer Price Index increased 0.3% in August on a seasonally adjusted basis after rising 0.5% in July. Over the last 12 months, this index increased 5.3%.
A few highlights:
- Gasoline, household furnishings, food, and shelter all rose in August and contributed to the monthly indexes seasonally adjusted increase.
- The energy index increased 2.0%, mainly due to a 2.8% increase in the gasoline index and the index for food rose 0.4%.
If an investor focused on all the challenges in the economy, they would not have put a penny in the stock market. Nevertheless, we are on track for another exceptional year. At Patriot, we believe that the overall allocation between stocks and bonds is the primary determinant of portfolio returns. This is one of the variables we can control to mitigate the risk of our client’s portfolios.