Portfolio Research Director, Kevin E. Donovan, CFA, shares his thoughts on market performance in the third quarter of 2021.
Hello. This is Kevin Donovan with CJM Wealth Advisors. We just finished the third quarter of 2021, and stocks were flat to slightly down for the quarter. At the beginning of the quarter, we just started to feel like we were coming out of the COVID pandemic, and then the Delta variant started, which kind of put the brakes on some of the economic recovery. So, industries like travel and restaurants that had been recovering, started to step back a little bit, and then some of their demands slowed down. Also, we had some supply chain issues. There were some jobs that were going unfilled. Even though there were a lot of jobs available, people were still reluctant to work, especially in some of the positions that are necessary in the supply chain, such as loading, unloading, and delivery. That led to some price pressures for consumers, so inflation started to rise a little bit.
None of this is good for stocks, so we saw the stock market kind of flatten, and then down in September to end flat to slightly down, like I said. Looking at the chart for the third quarter, the S&P 500 had about a 4% decline in September, which caused it to end at a gain of just 0.2%, so basically flat. The Dow was down almost 2%. International stocks were down 1%, and bonds were flat. Now bonds, it was kind of an interesting quarter. Bond yields started at about 1.5% on the 10 year for the treasury. It’s kind of the benchmark everyone looks at for bond yields. Then it started to go down pretty sharply to 1.1%. But by the end of the quarter, it reversed course, and ended up back at 1.5%. So, a lot happened within the quarter, but from June to September it was still at 1.5%. Looking at the full-year results, things look a little better for stocks. The S&P 500 is up almost 15% for the first nine months of the year. The Dow is up almost 11%. International up 6%, and bonds down 1.5.
Now, I said that stocks began and ended the third quarter at 1.5%. That’s still well above where they started the year, which is why bonds are negative. As yields go up, bond prices go down. So, what we have going forward for the end of the year, it’s starting to sound like a broken record, but COVID is still out there. If we get that under control, that should help employment numbers. People will probably start going back to work, hopefully, and that should ease up some of the supply chain issues that we’ve seen. Hopefully that will ease pressure on prices and inflation, which would help the economy go back to its recovery mode. That’s what would happen in a perfect world. As we know, COVID has kind of thrown a wrench in all that in terms of the timing of the pandemic, and this second wave that we’ve had with the Delta variant, so hopefully once we get through this, the economy can get back to normal.
I’d like to wish you a very happy holiday season, and I’ll see you next quarter.