Wealth Management News and Updates
October Market Insight
One constant in life is change. During the past year and a half, we have experienced more change than any of us ever imagined. While change may be disruptive, it also presents opportunities. As active stewards of your portfolio, we are always critically examining the potential and actual impacts. We believe that some of these changes, when settled and digested, may, in fact, set the stage for a higher next leg of this powerful and still relatively young bull market.
The trajectory of the U.S. economy has only modestly changed recently due to the Delta variant of COVID-19 and related disruptions to global supply chains. Contrary to the thought of a potential new economic downtrend, we expect growth to pick up through year-end as further progress is made towards eradicating COVID-19 as an economic threat.
The stock market altered its positive path last month (consistent with historical seasonal patterns) as the S&P 500 Index experienced its first 5% pullback since October 2020. The good news is that the fourth quarter has historically been the best for stocks with an average gain of 4%. As we look to next year, if the U.S. economy produces above-average growth as we expect, double-digit gains for stocks would be a reasonable expectation. Federal Reserve (Fed) Chair Jerome Powell’s term is up in February and his reappointment by President Biden is not assured. This is somewhat dependent upon the influence of the progressive wing of President Biden’s own party despite the rather dovish (i.e., supportive of lower interest rates) reputation Mr. Powell maintains. The Fed should also start its tapering activities (i.e., slowly scaling back pandemic related stimulus) over the next several months. Though this would certainly represent a policy change, the Fed has been very transparent, and the markets are anticipating this action.