Planning Next Steps

Stocks posted impressive weekly gains, as a relatively dovish Federal Reserve policy meeting, healthy economic data, and a strong tail end to the earnings season all boosted sentiment toward equities. The Dow Jones Industrial Average, the S&P 500 Index, and the Nasdaq Composite all reached record highs. Technology stocks and small-caps were particularly strong, and growth shares outperformed value stocks. Oil prices dropped from their recent highs, after Biden administration officials mentioned the possibility of releasing supply from the strategic petroleum reserve.

The quarterly earnings season wound down with ongoing strong results, as profit margins held up well despite higher commodity prices and supply chain disruptions in various industries. However, equity investors seemed to punish the companies with earnings that lagged consensus expectations more than they rewarded those that beat expectations.

At Wednesday’s conclusion of the Federal Reserve’s policy meeting, the central bank stated that it will begin to slow its monthly bond purchases by $15 billion later this month and in December. By not specifying the speed of the taper beyond December, the widely expected tapering announcement gives the Fed the flexibility to make adjustments, as economic conditions evolve.

The policy statement released after the meeting and Fed Chairman Jerome Powell’s post-meeting press conference stressed that policymakers still expect the recent high inflation readings to moderate and will need to see further labor market improvement before raising rates, helping to alleviate fears about an abrupt monetary policy tightening. This seemed to put a dovish spin on the tapering announcement for stock investors, who drove equities higher following the Fed meeting.

Economic data released during the week were generally robust, showing that the economy gained strength as the late-summer wave of the delta variant eased. Factory orders increased 0.2% in September, slightly more than consensus expectations. The government’s October employment report, released on Friday morning, showed 531,000 jobs added, topping consensus estimates. The unemployment rate fell to 4.6%. The Labor Department also said that the economy gained 235,000 more jobs in August and September than it originally estimated.

With the infrastructure package and associated tax changes looming, we anticipate some significant market movement in the near term. As always, the direction of these changes is unknown. Even the best stewards often fail to plan, because they don’t know what the future holds. It’s in moments like this that we are here to help. We continue to plan and invest for the future, understanding there are many uncertainties. These plans and investments for our clients bear in mind that the heart of man plans his way, but the Lord establishes his steps (Proverbs 16:9).

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.