The Drama of Wall Street

Where We Are
The final week of September brought not only a change in season but also a change in sentiment. Additional stimulus measures, strong corporate earnings and well-received news from the Federal Reserve contributed to positive momentum through the early summer months. However, global capital markets ultimately disappointed in the third quarter, leaving some investors feeling unsettled following previously impressive returns. The mixed results of the quarter serve as a good reminder that the trajectory of capital market performance is rarely a straight line.

Highlights from the third quarter include:

  • U.S. equities made modest returns in Q3, rising less than 1%, as recent all-time highs were dampened by September’s pullback.
  • Led primarily by bank stocks the financial sector had the most impressive returns—amid the prospect of higher interest rates and the improving economic landscape.
  • Surprisingly, shipping companies like FedEx and UPS experienced double-digit declines following a year of unprecedented demand.
  • Unemployment fell to 5.2% during August, a COVID-era low, as businesses continue to reopen. Consumer spending also rose modestly.
  • Bond market returns were mixed as a result of inflation concerns at home and abroad.

Where We are Going
Though uncertainty abounds, the economic recovery continues in a decidedly positive direction. Concerns about the pervasive Delta variant are top of mind for many as we head into the winter months. While Delta’s full impact on the economy remains to be seen, many parts of the country are experiencing steady declines in rates of infection and hospitalization. And as we have mentioned before, a healthy population is critical to a healthy economy.

Not surprisingly, the pandemic has changed the way we live, work and play. Former window shoppers now buy online, employees accustomed to collaborating in a conference room now video chat from the comfort and safety of their homes, and parents who used to wait in line at the box office for the latest Disney film now simply usher the kids to the living room on premier night. Therefore, it is easy to feel like the digital revolution has been fully realized, but in reality, far less of our “business as usual” has changed than we might suppose.

The illustration below, from trusted partners at Capital Group, shows the pervasiveness of several digital trends – you may be surprised! We welcome your feedback.

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