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Weekly Market Update 10/1/2021

By October 1, 2021 No Comments

Stocks snapped a seven-month streak of gains and registered their worst monthly loss since March 2020 as concerns around fiscal stimulus, monetary policy, persistent supply chain disruptions, and corporate profit warnings weighed on sentiment and investors were uncharacteristically reluctant buying market dips.  As a result, the S&P 500 experienced its first 5% pullback in over 225 days and ended September roughly -4.75% lower with only the energy sector finishing the month with gains.  The losses were not limited to equities either, as bonds fell over -1% in September (per the Barclays Aggregate Bond Index) after interest rates surged to their highest levels since June following the Federal Reserve’s somewhat hawkish September 22 meeting announcements.  Stocks, however, are still up over 15% on the year and despite the recent weakness, the S&P 500 was able to close higher for a sixth consecutive quarter.  As we head into the fourth quarter, we expect investors to closely monitor the continued drama in Washington before attentions shift towards the Q3 earnings season that unofficially kicks off in the middle of October and is expected to see S&P 500 year-over-year earnings growth around 25% (per FactSet).

Dollar Tree Outgrows Its Name

On Friday, two inflationary gauges indicated the highest US inflation since 1991 as well as 13-year highs for the Eurozone, so we found this week’s news from retail discounter Dollar Tree particularly noteworthy.  As its name implies, Dollar Tree, sells nearly everything for a dollar, but on Tuesday night the company departed from that longstanding pricing strategy and announced an expansion of a multi-price initiative with more merchandise ranging from $1.25 to as high as $5.  The discounter acknowledged rising costs and positive consumer feedback while also announcing an increased share buyback program and interestingly the stock responded with a 16.5% bounce on Wednesday.  Ultimately, we expect inflation to continue to persist at least through the holiday season as global supply chain issues ranging from manufacturing hubs in Southeast Asia, to shipping ports, to shortages in truck drivers continue to disrupt the flow of goods.

Regards,

Ian Browning, CFA | Director, Investment Strategies & Shareholder
Peter E. Simmons, JD | President & CEO

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