3rd Quarter 2021 Commentary

October 15, 2021

This chart from Morningstar says a lot about the last three months, and not just the stock market! The 4th of July came with much hope and enthusiasm for a return to a more normal life after 15 months of COVID induced pandemic challenges of one kind or another. But then ‘stuff’ happened.

Obviously, it’s just a reflection of Morningstar’s U.S. Market Index’s return for the quarter ending with a gain of 0.3%. For the last twelve months, the gain was over 31%, which is clearly outstanding. The chart shows the nineteen new market highs for the quarter. As well as the sharp drop and recovery in July when the “Delta” variant first made headlines. Then the strong performance continued up to September. Throughout September a variety of concerns weighed on the economy. These ranged from increased COVID pressure, ongoing supply chain/logistical issues, employment/staffing challenges, public finance fiscal management issues, etc., etc.

Fortunately, I think we are getting much closer to gaining the upper hand on COVID. We now have multiple viable testing options. Especially with the availability of rapid tests, which allow many people to be tested quickly and with timely results. There are now multiple vaccination options, which seem to be highly effective at reducing the likelihood of hospitalization and death. In addition, to the fairly expensive monoclonal antibody treatment, it looks like we are on the verge of having something as simple as a pill to treat early-stage infections. Overall, and in spite of some missteps, I would have to say that science and medicine have made stunning progress in the last 18 months or so.

Unfortunately, we [the world] has a long way to go with regard to the human and supply chain related economic issues.

In broad strokes it may be easy to understand how complicated and involved logistics are, but in the last 18 months we’ve all learned a hard lesson about how interdependent everything is. At this point, it is clear that getting the supply chain back to normal will be a long and perhaps, bumpy process.

For a variety of reasons people have dropped out of the labor pool so labor is going to be an ongoing issue. For women, it could be finding adequate/affordable childcare, but for early retirees, getting them back in the workforce may be another matter.

These issues will impact inflation, both actual and expected. Although the resolution of the supply chain issues may reduce some price pressure, increasing labor costs may result in higher imbedded costs if they are not offset by productivity gains.

As usual, there are a whole slew of other factors that will affect the economy going forward. Perhaps, the most recent is the elevated level of political gamesmanship being played out over the budget and debt limit.

Nonetheless, the thing to remember is that overall, the economy is actually doing quite well!

Here’s hoping for a good finish for what has been a very good year.



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