Market & Economic Update

The economy continues to strengthen

COVID-19 trends are greatly improving, and this still relatively young bull market is alive and well. As the leaves turn colors and begin to fall to the ground, we have many reasons to be thankful.

The economy slowed considerably in the third quarter due to the COVID-19 Delta Variant (as the growth rate of gross domestic product [GDP] slowed to 2.0% from 6.7% in the second quarter), well below the 10% that was expected back in early June. The good news is this is likely a temporary trend as growth is expected to pick up in the next few quarters. Big purchases were likely pushed back a few months, which helps the growth outlook for the future. Consumer balance sheets remain healthy, with trillions of dollars in savings and money market accounts. The consumer, which makes up about two-thirds of the economy, is in excellent shape heading into 2022.

So this is what it was like before Amazon!

Supply chain disruptions are being felt all across our country. Goods are taking longer to get to us and costing more than they did in the past. Fortunately, over the past few weeks, we have seen some signs that the worst of the supply issues may be ending. Although these issues lasted longer than most expected, the bottlenecks will continue to work their way out of the system over the coming months. This should provide consumers with some much need relief.

Above average earnings continue

Corporate earnings drive long-term stock gains and continue to justify current stock prices. Third quarter S&P 500 Index earnings have been extremely strong once again, with more than 80% of companies beating estimates (FactSet) and earnings up nearly 40% from 2020 levels. Yes, many companies have been impacted by the recent COVID-19 Delta variant-induced economic slowdown and supply chain problems, but corporate America remains quite optimistic about the future.

This time of year is historically strong for stocks…

The strong stock market performance this year is yet another thing to be thankful for. In fact, November has been historically the best month of the year for stocks, with the usually strong December right after that. Although some of the late seasonal gains could have been pulled forward by the 6% gain in October, the bull market is alive and well.

The next two months will go by quickly, as this time of year is always busy—and that’s a good thing because it means we are getting closer to normal.

At the end of the day, what matters most is how you are doing on a personal level. Are you in good spiritual, mental and physical health? Have you saved enough money to be financially free? And are you pursuing something higher than your own needs. I find that true fulfillment comes from serving others. More important than the rate of return on our accounts, and as we enter the holiday season, I hope you’ll join us in the true spirit of service and generosity (in whatever way that makes sense to you).

We’ve come a long way since early 2020 when COVID-19 first arrived on U.S. shores, so let’s not forget to take some time to remember how lucky we all are. We are grateful to be at your service, and look forward to a wonderful 2022 with you! Please contact me if you have any questions.

You can reach us at our office: (805) 938-7654

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