Volatility, supply chain issues, and “Fed speak” were dominant forces over the past week in our financial markets. It appeared that we were finally starting to see some real signs of a correction on Monday as the Dow Jones and S&P 500 Indexes both fell sharply. The buying we had been seeing over the last several months looked to be taking a “break” as the tax and capital gains discussions heated up amid the two-day Federal Reserve meeting. But, as has been the case lately, a mid-week bounce followed by a relatively calm Friday, saw the markets close the week with a slight gain. We have yet to see a full 5% sell-off from the highs of this year at this point. Even with Monday’s closing levels of 33,970 for the DJIA and 4,357 for the S&P 500, we have only seen a YTD drop of 4.66% and 4.14% respectively.
We continue to read about rising shipping costs, labor costs and supply-chain bottlenecks. These factors have had an impact on many sectors and companies like Nike, Costco and FedEx. Simply put, no one is immune from these ongoing issues. Inflation and rising prices will continue for some time until these persistent wrinkles are ironed out. Words of advice; start your holiday shopping now. Look past the “Pumpkin Spice and get moving! While consumers may be willing to pay higher prices today, the looming specter of slowing growth is inevitable. Companies that can maximize operating efficiencies and profits will be the winners in the near-term.
The Federal Reserve wrapped up its two-day meeting, expressing many of the sentiments we wrote about last week. Inflation is slightly higher than expected, growth projections are starting to come down and tapering will begin soon. The market took these statements in a positive manner as evidenced by the mid-week rally. Several members of the committee also noted that short-term interest rates, while still anchored near zero, could see increases starting in 2022. The goals as laid out by the Federal Reserve post Covid appear to be on track, if not slightly ahead. GDP (gross domestic product) estimates for the rest of this year have also been slightly revised to 5.9% from 7%. While it may not seem evident across all sectors of the market, it does appear that a slow down has begun in some areas. We will be keeping an eye on these types of headlines as the potential for more consumer “fatigue” sets in. Perhaps Monday’s sell off was indeed a warning shot fired. Stay tuned.
Enjoy your Sunday!
Your local Towson Financial Advisors
https://www.cnbc.com/2021/09/23/stock-market-futures-open-to-close-news.html