MARKET WATCH
Summertime’s done, come and gone my oh my! You can call this song, the United States Blues! With the third quarter of 2021 completed and the fourth quarter underway, there are quite a few people in this country scratching their heads and feeling a case of those old U.S Blues.
We are witnessing a period of government overreach and in many areas, while the most important function of our government, the job of protecting us from foreign enemies and protecting our borders, has been totally neglected as we suffered a humiliating exit from Afghanistan, while our southern border remains hopelessly porous. Hopefully, Senators Manchin & Sinema can convince the spendthrifts in Congress to focus on sustaining Social Security and Medicare for the next generations, rather than embarking on new spending schemes to gather votes. One can hope!
Meanwhile, the stock market continued its steady upward trend throughout the third quarter until the month of September. During September, according to Ned Davis Research’s Chief U.S Strategist Ed Clissold, two remarkable streaks for the S&P 500* came to an end. First, the index declined 4.8% in September, stopping the number of consecutive monthly gains at seven. Secondly, the S&P 500* closed the month 5.1% below its September 2nd record high, ending the streak without a 5% pullback at 211 trading days. While a 5% pullback is far from even a correction, it could very well mean we might finally experience the correction many have been anticipating. Remember, a correction is considered to have occurred when the S&P 500* pulls back 10%, but less than 20%. It is even more convincing when all three major indexes have a similar pullback. Corrections are considered to be healthy for the markets, and usually occur more often than we’ve seen during this current bull market.
As I remarked in the last newsletter, the indexes have performed quite well and their percentage gains would be solid for a full year’s performance. This still holds true as of the end of the third quarter. The Dow Jones Industrial Average (DJIA)* ended the quarter at 33,843.92 for a 10.58% year to date (YTD) gain. The S&P 500* closed at 4,307.54 for a 14.68% increase YTD. The NASDAQ* finished the quarter at 14,448.58 which was a 12.11% YTD performance, and the Russell 2000* managed an 11.62% YTD gain and closed at 2,204.37.
The third revision for Gross Domestic Product (GDP) was released on September 30th, and the rate of annual growth was 6.7% for the second quarter of 2021. The annual rate of growth in the first quarter was 6.3%. The first estimate of third quarter growth will be released at the end of October. While there have been some indications growth has been slowing in the third quarter, based on some disappointing employment numbers in August and September, GDP now stands at $22.74 trillion and is larger than it was before the pandemic.
The unemployment rate decreased to 4.8% according to the employment report released on October 8th, even though the 194,000 jobs created were less than 50% of what was expected. There are still about 2 million more people unemployed than there were before the pandemic and the labor force participation rate is lower (61.6%) as well. With the end of the federal subsidy on unemployment benefits in early September, and all the stimulus money released into the economy since March of 2020, not to mention that which is still to come in the form of an infrastructure package et al, any correction shouldn’t devolve into something worse.
After being absent from our concerns for many years, the scourge of inflation came abruptly back into our minds as the Consumer and Producer Price Indexes registered large increases which have been causing quite a bit of angst. Most of us don’t need the indexes to be acutely aware of the pain of inflation. As we struggle to reestablish supply lines and ramp up production with acute shortages of labor and components, especially chips, I think we’ll still find this bout to be transitory, as the Fed has said. Inflation can still be considered transitory even if it lasts several quarters, provided expectations subside.
Despite the death and destruction wrought by Marxist governments the ideology is having a troubling resurgence these days. Be wary.
DOES THIS CRAZY MARKET MATH COMPUTE TO YOU?
If every now and then you feel like you’re living in unprecedented times, here is an interesting factoid to support that sentiment. The combination of accelerating growth, near-zero interest rates and soaring profits has not been lost on the stock market. The total value of U.S. stocks is now over $51 trillion, which is a $16 trillion increase from the $35 trillion total valuation prior to the pandemic.
To put this $16 trillion advance into further perspective, consider this tidbit of information. It took over 200 years, from the founding of the earliest U.S. stock exchange in 1790 to just before the 2007-09 financial crisis, for the U.S. stock market to create $16 trillion in value. This post-pandemic rally is remarkable because of the magnitude of the gains and because much of this increase in value happened with the economy in a recession, and in the midst of an evolving global health crisis.
While it is understandable stock market valuations would increase more dramatically at a time when there is basically no other place to go for growth with liquidity, one can’t help but point out the elephant in the room. With nothing remotely approaching the definition of a correction since the depths of the pandemic, and markets in a rather narrow trading range with lower highs and lower lows since early September, we could be in the beginning of a slow descent towards that correction. I don’t predict, but rather shed light.
**Based on research by Kevin Caron
ESTABLISHING A TRUSTED CONTACT ON YOUR ACCOUNT
Over the course of the last few years, our firm may have requested that you give them the name and contact information of a trusted contact. This has been in response to an attempt by FINRA & the SEC to enhance investor protections. While it is not mandatory for you to establish a trusted contact on your accounts, there are some very good reasons to do so, some of which are outlined below.
A trusted contact is a person you authorize your financial firm to contact in limited circumstances, such as if there is a concern about activity in your account and they have been unable to get in touch with you. A trusted contact may be a family member, attorney, accountant or another third-party who you believe would respect your privacy and know how to handle the responsibility. You may establish more than one trusted contact.
It is suggested anyone who has an investment account should have a trusted contact for that account. Having one or more trusted contacts provides another layer of safety on your account and puts your financial firm in a better position to help keep your account safe.
Having a trusted contact can help with your account in several ways. Maybe you are traveling. Maybe you have been displaced by a natural disaster. Maybe there is a concern about fraud. Or maybe you are having a health issue. A trusted contact can help your firm connect with you. A trusted contact may be asked to confirm your current contact information, health status or the identity of any legal guardian, executor, trustee or holder of a power of attorney. U.S. broker-dealers are required to provide, and other financial firms may provide, a written disclosure that lays out these details.
Designation as a trusted contact does not provide the designated person with authority to make transactions in your account and does not make that person a power of attorney, legal guardian, trustee or executor. By designating a trusted contact, you are authorizing the firm to contact someone you trust and disclose information about your account only in limited circumstances. A firm may only disclose reasonable categories of information with a trusted contact, including information that will assist the firm in administering the customer’s account. A trusted contact is simply someone who can help your financial firm help you, if needed.
You can contact your financial firm or investment professional and ask to add a trusted contact to your account at any time. You can also ask your financial firm to change or update your trusted contact information at any time. You may be asked to add a trusted contact to your account when you log on to your investment account online. Your financial firm may send notices to you, via email or regular mail, that include instructions for adding a trusted contact to your account. Before clicking on any link in an email notice about a trusted contact, make sure you verify that your firm sent the email. If you decide to name a trusted contact, you might want to reach out to them in advance to let them know.
Let me know if you have questions.
*The S&P 500, the DJIA, the NASDAQ and others referenced are unmanaged indices that are widely used as indicators of Market Trends. Past Performance does not guarantee future results and the performance of these indices does not reflect the fees and charges associated with investing. It is not possible to invest directly in an index.
*Dollar Cost Averaging through a systematic savings plan is an excellent way to build an account without a sizeable initial investment. Saving a portion of our pay each month is very important. Company sponsored pension plans are one method to save and should be used for retirement. Other systematic investment accounts, such as ROTH IRA’s, Traditional IRA’s, Coverdell Accounts, 529 Plans, Brokerage Accounts and Annuities can also be opened, and debited directly from checking or savings accounts. For more information, just call to set up an appointment. Referrals are always welcome.
COMPANY INFORMATION
John H. Kaighn offers various products and services under the trade name of Jersey Benefits Advisors.
PO Box 1406
Ocean City, NJ 08270
Phone: (609) 827-0194
Fax: (856) 637-2479
Email: kaighn@jerseybenefits.com
http://jerseybenefits.com
John H. Kaighn is an Investment Advisor Representative & Registered Representative of Royal Alliance Associates, Inc. Securities and Advisory Services are offered through Royal Alliance Associates, Inc. (RAA) Member FINRA & SIPC. RAA is separately owned and other entities and/or marketing names, products or services referenced here are independent of RAA.
10 Exchange Place
Suite 1410
Jersey City, NJ 07302
Royal Alliance Associates, Inc. is not affiliated with Jersey Benefits Advisors or Jersey Benefits Group, Inc.
Insurance Services and Third Party Administration offered through Jersey Benefits Group, Inc., a licensed Insurance Agency in the State of New Jersey.
PO Box 1406
Ocean City, NJ 08226
Phone: (609) 827-0194
Fax: (856) 637-2479
Email: kaighn@jerseybenefits.com
http://jerseybenefits.com
All opinions expressed in this newsletter are independent of Royal Alliance Associates, Inc. and solely those of John H. Kaighn and Jersey Benefits Advisors.
