The third quarter was a tale of two halves. Through the first half, the market continued to make new highs, supported by economic reopening, strong corporate earnings, and continued monetary stimulus. The second half saw a turbulent September that wiped away most of the gains made in July and August. The S&P 500 fell 4.66% in the month of September, resulting in a slightly positive return of 0.57% for the quarter and a year-to-date return of 15.90%. While equities continue the steady march higher, bonds continue to struggle, with the total Canadian Bond Market down 4.30% year-to-date.
Global markets have been challenged in recent weeks. During times of uncertainty and increased volatility in the markets, investors often search for reasons as to why markets are selling off. While we can never know with complete certainty why, or when, markets act the way they do, some recent concerns include:
Continued fears around COVID, continued restrictions, and the widespread Delta variant.
Central Banks beginning the taper talks (easing of accommodative policy measures).
Rising bond yields.
Sluggish employment recovery/people not wanting to return to work.
Pervasive supply chain disruptions. Have you tried ordering anything lately?
Rising inflation. Starting to look like it’s not so transitory…
Risk of significant debt defaults by a Chinese property development company, Evergrande, and the potential fallout for the financial system.
With many stocks at or near all-time highs, bond rates near all-time lows, and expectations of rising inflation, forward-looking returns for investors are likely to be more modest. Investors should not be complacent with respect to their investment portfolio. At Anchor Pacific, we are diligently focused on designing and structuring portfolios to be resilient and perform to meet client goals across a wide range of potential economic outcomes.
We would like to thank you for your continued support and trust that you have placed upon us in being stewards of your capital.