Market Outlook – 4th Quarter 2021

There are currently several key factors in the markets that are giving us some pause. Due to these factors, we are taking a “wait & see” stance before we make any major structural changes to our allocations. The markets have currently been trading sideways or trending down with any news of the Federal Reserve starting to “Taper” or slow down its’ asset purchases, which was a major factor in reducing interest rates. Since inflation management and full employment are the Fed’s primary mission, the markets are anticipating a slowing or halt to the Fed’s bond purchases (Tapering) and potentially, a hike in interest rates in early to mid-2022. So, we may be seeing an end to the Fed’s quantitative easing program and the start of small interest rate increases. This will put pressure on stocks as well as federal borrowing. Other items that are affecting the markets:

• The sudden spike in COVID cases due to the Delta variant is affecting market sentiment.
• Global oil prices are falling due to perceived lower travel because the COVID spike.
• Inflation (although potentially only a transitory situation) is taking a toll on consumers.
• Pending new infrastructure & spending legislation may impact taxes, deficits and inflation.
• The University of Michigan monthly consumer confidence index has been tracking down for several months.
• On the positive side, corporate earnings have been stellar with 78% of reporting companies beating their estimates.

Overall, all of the above causes us to be cautious at this time. While we are maintaining our equity allocations for now, we are not adding to them. While our investment team is constantly monitoring the big economic picture, what is most important to us is your individual financial situation and how these factors directly affect you. We do this on a weekly basis. If you would like a complementary portfolio review, please contact us to schedule an appointment. Scott Spiering is the founder and Chairman of the Board of Anchor Bay Capital. He is the Chief Portfolio Strategist and leads our investment team. Scott is also the author of “The Frugal Investor” and the creator of the Frugal Investor strategy.