PFA Updates

Oct 20, 2021

Welcome to the 4th quarter, friends.  Our team has been very busy analyzing the markets and economy, poring over quarterly performance reports and reviewing our investment model strategies. 

We are happy to report that our Investment Models continue to track closely with their comparative benchmarks while maintaining lower Beta (less volatility), and higher Alpha (excess returns), as measured by Morningstar. 

Everyone with a TD Ameritrade account will receive his or her quarterly investment performance report this week, and it's the first time in 18 months that we have had a negative quarterly return.  On the bright side, our YTD, one-year and three-year returns have been very good.  Don't let the late September 4.76% drop in the S&P500 get you down because we have retraced 50% of the drop as of Friday 10/15/2021 (Bigcharts.com). 

Comments from the majority of economists, market technicians and investment managers we follow remain positive.  We hold out hope for a "Santa Claus" rally in the 4th quarter of 2021, carrying over into the 1st quarter of 2022.  See below for some comments of interest.

Regarding the Economy

• "We expect accelerating economic growth in the 4th quarter and into 2022.  We expect a hot start to 2022 and then fading by the 4th quarter." -  Dr. David Kelly, JPMorgan Guide to Markets 10/4/2021
• "Current strength in the ISM Manufacturing Index is another key reason to continue to give this bull market the benefit of doubt." -  Jim Stack, Investech Research 10/15/2021
• "The strength in the Conference Board Leading Economic Index (LEI) bodes well for economic growth into 2022." -  Bob Brinker, Marketimer 10/4/2021

Regarding the Stock Market

• "The government debt ceiling and reconciliation debate now looks like it could carry into December.  Add to that the possibility of Fed tapering before the end of the year and we've still got some mud to trudge through. Meaning, we may not see new highs until 2022 when some of these headwinds subside." -  Liz Young, SOFI 10/14/2021
• "We are raising our 2021 S&P500 index operating earnings estimate by $5 to $195 based on rising profit margins, and maintaining our 2022 estimate of $210." -  Bob Brinker, Marketimer 10/4/2021
• "My view of the markets remains the same...the S&P500 will be higher at the end of 2021 than it is today after it works through this volatile base building process.  My current upside target remains 4,700 to 4,800." - Marc Chaikin, Chaikin Analytics 10/11/2021

Tom's Final Thoughts

We have had some clients in recently bothered by the abundance of negative news headlines.  They usually ask us, "How much longer can this stock market keep going up before it comes crashing down?"  That's a good question. Unfortunately, nobody knows.  We remind clients that we are not stock market forecasters.  Our views and strategies are based on data from multiple sources: economic and market technicals and most importantly commentary from some very smart people who have good track records in navigating the stock market. 

We are long-term believers in the historical growth of the US stock market, so we typically have a more positive view than news headlines present.  We hope to bring some calm to our clients' concerns and some confidence in the long term. 

To visualize the current economy and market, think of a traffic light. Let's say we track ten different indicators.  At this point in time, seven of the ten have a green light and three have yellow lights.  There are no red indicators that we see at this time. 

The reality is, there are always concerns about the economy, markets and politics.  It can all change in the next quarter, but for right now, we don't see any reason to change our current investment strategies.  However, if you ever have a concern, do reach out to us so we can talk it over.  Happy Holidays!  Stay healthy and safe.

Kind Regards,

Tom