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.
Thus far, the decline that began in September has continued and we are in a downward trading pattern. Right now, the market is off 3.3% from all-time highs. But that has diverged somewhat from the equal weighted index, shown in purple here, which has broken out of that downward trading pattern. This indicates that smaller stocks in the S&P 500 are currently outperforming the largest stocks.
In the news this week, the third quarter earnings cycle began with earnings reports from JP Morgan, Blackrock, and Delta airlines. Results were largely overshadowed by the Consumer price index rising another 5.4% from 2020 levels. Supply chains remain tight which continues to drive prices higher. Stocks waivered with the results from the inflation data with about half of the stocks in the S&P advancing to higher prices.
Drilling in deeper into those CPI results, we can see that these increases in prices do not appear to be abating. This is now the fourth month in a row of annualized increases in prices of 5% or more. Drilling in deeper still, we can see the primary drivers of the increase are gasoline (shown in purple), energy (shown in blue) and natural gas (shown in orange). Each of these items have outpaced the index average. We have also seen medical commodities (shown in green) and apparel (shown in grey) drop in prices. Food (shown in blue) has increased but is still below the index average. Based on this, it’s pretty clear that short term, we are seeing rising prices for consumers.
Despite all the hype, however, there is still no evidence of long-term inflation getting out of hand like we saw in the 70’s and 80’s. Currently, the 5-year expected forward inflation rate is right at 2.34% which is roughly in line with the historical average going back to 2001. Either runaway inflation is overhyped or the bond market is completely missing the train here.
For more information on this topic or a variety of other topics including market updates, financial planning, and wealth management please click the Learn More button or the link in the comments below and don’t forget to like and subscribe and we’ll see you next week.
1.FactSet Research Systems. (n.d.). S&P 500 & S&P 500 Equal Weight Index (Interactive Charts). Retrieved October 13, 2021, from FactSet Database.
2.Bureau of Labor Statistics. “12-month percentage change, Consumer Price Index, selected categories.” Updated October 13, 2021. Retrieved from https://www.bls.gov/news.release/cpi.toc.htm
3.Federal Reserve Bank of St. Louis, 5-Year, 5-Year Forward Inflation Expectation Rate [T5YIFR], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/T5YIFR, October 12, 2021.
Signature Wealth Management Group is registered as an investment adviser with the SEC. Signature Wealth only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.
Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change.
Information contained herein does not involve the rendering of personalized investment advice, but is limited to the dissemination of general information.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living.
Forward-looking statements are not guarantees, and they involve risks, uncertainties and assumptions. The use of words such as “will”, “may”, “could”, “should”, and “would”, as well as any other statement that necessarily depends on future events, are intended to identify forward-looking statements.
Information is not an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned herein.
The S&P U.S. Style Indices measure the performance of U.S. equities fully or partially categorized as either growth or value stocks, as determined by Style Scores for each security. The Style series is weighted by float-adjusted market capitalization (FMC), and the Pure Style index series is weighted by Style Score subject to the rules described in Index Construction.
All information presented prior to an index’s Launch Date is hypothetical (back-tested), not actual performance. The Index returns shown do not represent the results of actual trading of investable assets/securities. S&P Dow Jones Indices LLC maintains the Index and calculates the Index levels and performance shown or discussed, but does not manage actual assets. Please refer to the methodology paper for the Index, available at www.spdji.com for more details about the index, including the manner in which it is rebalanced, the timing of such rebalancing, criteria for additions and deletions, as well as all index calculations.