Mixed Emotions

The major indexes retreated over the Labor Day-shortened trading week. The small real estate sector led the declines in the S&P 500 Index, as longer-term interest rates increased. Meanwhile, consumer staples and utilities stocks held up best. The small-cap Russell 2000 Index declined after two consecutive weeks of outperforming the large-cap benchmarks, and value stocks trailed growth shares. Although volatility increased, trading volumes remained somewhat subdued.

Several factors weighed on sentiment – one of the emotional components of market movement – including September’s reputation for being a weak month for stocks. The August payrolls “miss” seemed to linger in the minds of investors and exacerbate worries that the Delta variant of the coronavirus was slowing the economic rebound. On Thursday afternoon, President Biden announced that all large employers must require workers to either be vaccinated or submit to weekly testing. Additionally, Biden insinuated that vaccination would become mandatory for federal workers and contractors…with a notable exception of Congress.

The potential for political gridlock is also creating some market worries. On Wednesday, the website Axios reported that Democratic Senator Joe Manchin may only support about $1 trillion of Biden’s $3.5 trillion spending plan, highlighting the wide gap between moderates and progressives. Manchin’s vote will be critical in passing the legislation in the evenly divided U.S. Senate (with Vice President Kamala Harris able to break the deadlock). Of course, wherever this plan lands, the effect on small business will likely be an increase of “rendering to Caesar those things that are Caesar’s” (Mark 12:17). The potential tax ramifications surrounding paying for the spending plan will loom large heading into the fourth quarter. Meanwhile, Treasury Secretary Janet Yellen said that extraordinary measures to avoid breaking the congressionally mandated federal debt ceiling were likely to be exhausted in October and reiterated her plea for legislators to take action.

Finally, inflation worries persist. On Friday, stocks appeared to slip after the Labor Department reported that producer prices rose 0.7% in August, a slowdown from July’s 1.0% gain, but above consensus expectations for a 0.6% increase. The tight labor market signaled further profit margin challenges for firms. According to the Job Openings and Labor Turnover Survey (JOLTS) data released Wednesday, there were a record 10.93 million positions waiting to be filled in July, almost 1 million more than consensus estimates. Weekly jobless claims also fell more than forecast to a new pandemic-era low of 310,000.

The market, as we’ve discussed, is typically a lead indicator of our nation’s economic health. Although sentiment in various areas continues to be mixed (a veritable emotional “roller coaster,” at times), the market appears to be willing to give Biden and the Federal Reserve an opportunity to keep the ball rolling. Our team is preparing to rebalance many of our portfolios, in order to harvest some of the recent profit, while also remaining poised for opportunity (and threats) to the market heading into 2022.

Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights

Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc.(APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purposes of avoiding penalties that may be imposed by law. Each tax payer should seek tax, legal or accounting advice from a tax professional based on his/her individual circumstances.
This material is for informational purposes only. Neither APFS nor its Representatives provide tax, legal or accounting advice. Please consult your own tax, legal or accounting professional before making any decisions. Information has been obtained from sources believed to be reliable and are subject to change without notification. The information presented is provided for informational purposes only and not to be construed as a recommendation or solicitation. Investors must make their own determination as to the appropriateness of an investment or strategy based on their specific investment objectives, financial status and risk tolerance. Past performance is not an indication of future results. Investments involve risk and the possible loss of principal.