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Quarterly Market Review: July-September 2021

Quarterly Market Review: July-September 2021

Market Overview
(Q3 2021)

Overall, the third quarter was a roller-coaster ride for the market. The Dow, the Russell 2000, the Nasdaq, and the Global Dow lost value, while the S&P 500 was able to eke out a quarterly gain. Treasury yields, the dollar, and crude oil prices ended the third quarter higher, while gold prices dipped lower. Financials, information technology, communication services, and health care ended the quarter in the black. Energy, industrials, and materials fell. Despite the downturns, the benchmark indexes remain well ahead of their 2020 closing values, led by the S&P 500.

July kicked off the third quarter with large caps outperforming small caps. The S&P 500, the Dow, and the Nasdaq advanced, reaching record highs along the way, while the small caps of the Russell 2000 fell. Treasury yields, the dollar, and crude oil prices also declined. Gold prices advanced. By the end of the month, over 80% of the S&P 500 companies that reported earnings exceeded expectations. COVID cases surged as the Delta variant spread across the country. Inflation figures continued to rise. The Federal Reserve noted that the economic recovery remained on track. Second-quarter gross domestic product continued to advance. Health care led the market sectors, followed by real estate, utilities, information technology, and communication services. Financials and energy lagged.

Equities continued their strong showing in August, recording several record highs during the month. Strong corporate earnings reports and improving economic conditions helped bolster investor confidence, despite the increasing prevalence of the Delta variant. Growth stocks outpaced value shares. Financials and communication services led the market sectors, while energy lagged. The Nasdaq paced the indexes, followed by the S&P 500, the Russell 2000, the Global Dow, and the Dow. The jobs sector improved, while wage gains were strong, and unemployment claims dipped.

Following a strong July and August, September saw the market struggle with volatility. Traders had other concerns to deal with, including slowing economic growth, elevated inflation, supply-chain disruptions, a global energy crunch, and China’s regulatory restrictions. In addition, investors are facing the prospects of the Federal Reserve beginning to wind down its stimulus measures. Each of the benchmark indexes lost value, with the Nasdaq falling and the S&P 500 dipping Among the market sectors, energy climbed, while the remaining sectors ended well in the red. The dollar and 10-year Treasury yields advanced, while gold prices declined.

Eye on the Month Ahead

Heading into the fourth quarter of 2021, several economic indicators have improved, while a few have waned. Real estate and manufacturing slowed from the pace set earlier in the year. GDP posted strong data for the second quarter, although some estimates suggest that the third quarter will not be quite as strong. On the jobs front, there were nearly 11 million jobs available but nearly 8.7 million unemployed actively looking for work, further widening the gap between job openings and hires.

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