Quarterly Financial Market Update: Q3 2021

October 15, 2021 | Article

Big Picture

Resurgent virus impacts, mounting fears of inflation, ongoing supply-chain disruptions, surging energy prices, risks of a slowdown in China’s industrial and property sectors, and anticipation of a reduction in central bank liquidity provisions all weighed on markets this quarter.

Returns as of September 30, 2021 (%)

Index 1 MO 3 MO YTD 1 YR 3 YR 5 YR 10 YR
U.S. Equity

 S&P 500 TR USD
 DJ Industrial Average TR USD
 NASDAQ Composite TR USD
-4.65
-4.20
-5.27
0.58
-1.46
-0.23
15.92
12.12
12.66
30.00
24.15
30.26
15.99
11.00
22.67
16.90
15.68
23.37
16.63
14.72
20.93
International Developed Markets

 MSCI World ex USA NR USD

-2.87

-0.66

9.19

26.50

7.87

8.88

7.88
Emerging Markets Equity

 MSCI EM NR USD

-3.97

-8.09

-1.25

18.20

8.58

9.23

6.09
U.S. Fixed Income

 Bloomberg US Agg Bond TR USD

-0.87

0.05

-1.55

-0.90

5.36

2.94

3.01
Global Fixed Income

 Bloomberg Global Aggregate TR USD

-1.78

-0.88

-4.06

-0.91

4.24

1.99

1.86

Past performance does not guarantee future results. All data is from sources believed to be reliable but cannot be guaranteed or warranted. Please see important disclosure regarding index performance

Equities

Global equities, challenged by a variety of headwinds, finished the quarter in mostly negative territory.

  • U.S. stocks finished the quarter with a turbulent September, erasing the gains of July and August.
  • International developed stocks were mixed for most of the quarter, ending on a down note.
  • Emerging market stocks extended their cooldown from a year ago, with a rough quarter.1

Fixed income

Fixed income performance across most markets was mixed, as most bond indices fell the second half of the quarter.

  • The Bloomberg Barclays U.S. Aggregate Bond Index, or the “Agg,” finished slightly positive on quarter.
  • The Bloomberg Barclays Global Aggregate Index, representing bonds from both developed and emerging markets, ended down for the quarter.2

Factors

Exposure to investment risk factors were a mixed bag for the quarter. In the U.S., momentum was a positive contributor. In international developed markets small caps continued to outperform. While in the emerging markets, most factors held up a bit better than the general market on a relative basis (though all were down on an absolute basis).3

News Impacting Markets

  • COVID-19
    Fears over the surge in Delta coronavirus variant triggered falls across global markets at various points in the quarter. While global COVID-19 case counts have receded towards the end of the quarter, investor concern lingers over the potential for another rise in cases.
  • Economic Recovery
    Pressures from supply chain-related constraints and subsequent inflation concerns are acting as headwinds for the global economy. This has been exacerbated by fears about a potential default of Chinese property giant Evergrande Group, and the impact reverberations might have on the Chinese economy in general.

    Central banks around the world responded to the economic challenges presented by the pandemic with historic amounts of liquidity and market support. They currently account for a total of $300 billion of [monthly] bond buying. With central bankers preparing to rein in the pace of stimulus by reducing the pace of asset purchases (i.e. “taper”), market participants are positioning for potential stock market volatility that could arise in response to changes in stimulus.

Headline news will continue to be a potential catalyst to inject volatility into markets on a daily basis. For long-term investors, it’s best to keep in mind that markets tend to adjust and weather all manner of macro-economic environments while rewarding those who patiently stay the course.

As always, the Eide Bailly Financial Services Team will continue to monitor current events, while staying focused on achieving investing success over the long-term.

Do you have questions about how these market changes are affecting your portfolio?


1Morningstar Direct, as of Oct 1, 2021
2Morningstar Direct, as of Oct 1, 2021
3Morningstar Direct, as of Oct 1, 2021

Financial Advisor offers Investment Advisory Services through Eide Bailly Advisors, LLC, a Registered Investment Advisor. Securities offered through United Planners Financial Services, Member of FINRA and SIPC. Eide Bailly Financial Services, LLC is the holding company for Eide Bailly Advisors, LLC. and Eide Bailly Agency, LLC, which is wholly owned and operated under Eide Bailly LLP. Insurance products are offered or issued under Eide Bailly Agency, LLC. Eide Bailly Advisors, LLC employees can also be licensed as insurance agents/producers of Eide Bailly Agency, LLC. Eide Bailly Financial Services and its subsidiaries are not affiliated with United Planners. Not all products and services are available in all states.

Index Disclosure and Definitions

All indexes have certain limitations. Investors cannot invest directly in an index. Indexes have no fees. Historical performance results for investment indexes generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance. Actual performance for client accounts may differ materially from the index portfolios. S&P 500 Index represents the 500 leading U.S. companies, approximately 80% of the total U.S. market capitalization. Dow Jones Industrial Average (DJIA) Is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ. The Nasdaq Composite Index (NASDAQ) measures all Nasdaq domestic and international based common type stocks listed on The Nasdaq Stock Market, and includes over 2,500 companies. MSCI World Ex USA GR USD Index captures large and mid cap representation across 22 of 23 developed markets countries, excluding the US. The index covers approximately 85% of the free float-adjusted market capitalization in each country. MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets (as defined by MSCI). The index consists of the 25 emerging market country indexes. Bloomberg Barclays US Aggregate Bond Index measures the performance of the U.S. investment grade bond market. The index invests in a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States – including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities, all with maturities of more than 1 year. Bloomberg Barclays Global Aggregate (USD Hedged) Index is a flagship measure of global investment grade debt from twenty-four local currency markets. This multi-currency benchmark includes treasury, government-related, corporate and securitized fixed-rate bonds from both developed and emerging market issuers. Index is USD hedged. © Morningstar 2021. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied, adapted or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information, except where such damages or losses cannot be limited or excluded by law in your jurisdiction. Past financial performance is no guarantee of future results.

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Financial Advisor offers Investment Advisory Services through Eide Bailly Advisors LLC, a Registered Investment Advisor. Securities offered through United Planners Financial Services, Member of FINRA and SIPC. Eide Bailly Financial Services, LLC is the holding company for Eide Bailly Advisors, LLC. Eide Bailly Financial Services and its subsidiaries are not affiliated with United Planners. 
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