Welcome to the weekly market update from Signature Wealth Management. I’m Brian Ransom, Research Director from Signature Wealth and here’s what happened in the market this week.
It appears that the September pullback is over for now. Peak-to-trough, the market declined about 5% and has since broken out back towards new all-time highs.
In the news this week, the first bitcoin ETF began trading. The ETF from ProShares trades in bitcoin futures and not bitcoin itself but had significant fund flows on its opening day. New results from a very large Pfizer vaccination trial showed 95.6% effectiveness against COVID-19 and its delta variant. And Chinese real estate giant Evergrande made an overdue payment on a defaulted bond according to Chinese state-owned media.
Covid-19 cases continue to fall at a rapid rate. The percent of the US population with two vaccinations is at 57%. The rise in delta variant cases beginning in July of 2021 appears to be the primary cause of the stock market slowdown throughout the third quarter. The fall in Covid-19 cases very closely correlates to the end of the September downturn and the S&P 500 has rallied on this news.
In fact, if you carefully examine the rally and subsequent September downturn in the S&P 500, you can see exactly what I’m talking about. While the decline in the S&P 500 began in September, the broader stock market as measured by the Advance-decline line shown in red actually began in July. Meaning that most stocks entered into a correction right when the delta variant began its surge. The S&P 500 didn’t catch up until September because the largest stocks in the index didn’t begin their decline until that point. However, now that Covid-19 cases have subsided, the Advance-decline line actually began to rally ahead of the S&P 500 indicating that the September pullback would be short-lived. Currently, the S&P 500 rally is seeing much broader participation in the wider stock market beyond just the largest stocks further indicating that the market is in good shape.
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1.FactSet Research Systems. (n.d.). S&P 500 (Interactive Charts). Retrieved October 21, 2021, from FactSet Database.
2.The Center For Disease Control and Prevention. “COVID Data Tracker” Trends in Number of COVID-19 Cases and Deaths in the US reported to CDC, by state/Territory. Retrieved October 22, 2021 at https://covid.cdc.gov/covid-data-tracker/#trends_dailycases
3.FactSet Research Systems. (n.d.). S&P 500 & United States Advance/Decline line (Interactive Charts). Retrieved October 21, 2021, from FactSet Database.
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