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The S&P 500 managed to eke out a very minor gain of 0.23% for the third quarter. That was better than the almost -2% experienced by the Dow Jones Industrial Average and the -0.38% loss for the Nasdaq. Concerns continue to mount over supply-chain issues, inflation’s lasting effects and challenges employers face finding able-bodied workers willing to show up. All of this comes as the incredibly strong economic and market rebound from 2020’s pandemic lockdown propelled the stock market to new all-time highs. Now we look forward to third quarter earnings reports to begin in a week.

With the concerns mentioned above, it’s no wonder earnings estimates by analysts have pulled back slightly over the last month. The chart below from FactSet shows earnings estimates (solid line) and the price movement of the S&P 500 (dotted line) over the last quarter.

After sharply rising in July, the solid line (analysts earnings estimates) leveled off for most of August. It then began to decline through September. This slight reduction in earnings estimates also saw the S&P 500 decline. Once again we see why September is considered the worst month on average for the stock market.

We’ll keep a close eye on earnings reports as they are released and update you here. If you have any questions, please contact me.

The Markets and Economy

Supply-chain problems worsen as ports in the U.S. are seeing dozens of ships loaded with containers sitting offshore for as long as three weeks waiting to have goods unloaded. The participants from shipping lines and port workers to warehouse operators and railways are all blaming the others for the problems. One thing everyone agrees on is a drastically short supply of workers.
Consumer spending ticked up slightly in August, a sign the U.S. economic recovery is gaining momentum heading into the holiday selling season.
U.S. corporations are buying a lot of commercial real estate. According to S&P Global Market Intelligence, publicly traded companies own land and buildings valued at $1.64 trillion. That’s up 38% from 10 years ago. Amazon, Google and Facebook have been some the largest purchasers.
According to the Congressional Research Service, there have been 21 government shutdowns in history when our nation’s lawmakers failed to agree on spending bills to fund government outlays. The most recent shutdown was a 35-day stoppage that ended on January 25, 2019. That was the longest closure in U.S. history.
Home prices continued to climb to a new record in the 12-month period ending in July. The 19.7% increase in the S&P CoreLogic Case-Shiller National Home Price Index marked the highest annual rate of price growth since the index began in 1987.
The U.S. economy expanded at an annualized rate of 6.7% in the second quarter. That’s up slightly from the previous estimate of 6.6%. For the first three months of 2021, the economy grew by 6.3%.
Two years before a polio vaccine was developed in 1955, the U.S. reported 35,000 polio cases. That was in 1953. The most recent polio case was 42 years ago in 1979 according to the CDC.

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The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.

Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.

Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc. and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.

Securities offered through Triad Advisors, member FINRA/SIPC. Investment advice offered through Resources Investment Advisors, LLC, an SEC-registered investment adviser. Resources Investment Advisors. LLC and Vertical Financial Group are not affiliated with Triad Advisors.

David Kover on October 4th, 2021

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Concerns Persist Heading into Third Quarter Earnings Season