The major equity markets (S&P 500, EFA, EEM) have done well for the 3rd quarter, with the US markets being the shining star. While we think there will be some consolidation, we still expect this year to end positively.
After a positive 2nd quarter, fixed income posted slight negative returns in the 3rd as rates moved higher. All in all, fixed income remains in negative territory for the year. We continue to watch rates to determine necessary duration moves in our portfolio.
Sectors and factors of note are Technology (XLK), Real Estate (IYR), and Financials (XLF). We continue to see rotation in the market as it looks for new leadership. As rates move down, technology tends to be the biggest beneficiary. When rates move up, you start to see other sectors outperform. This rotation makes positioning in the portfolios difficult; especially when there is no clear view from the market on interest rates.
Our views have not changed from the 2nd quarter and we continue to watch three main things: fiscal policy, monetary policy and interest rates. As long as we have fiscal stimulus and accommodative monetary policy, we could see the market continue to make new highs. However, the market doesn’t always go up in a straight line, and rates will not be low forever. Increased volatility is likely as we see the markets views and perceptions on these catalysts change and/or evolve.
Please see below for further detailed analysis and chart references. If you have any questions or would like to discuss anything mentioned, please do not hesitate to reach out. We appreciate each one of you and hope 2021 has been good to you thus far. Rounding out the last quarter of this year we look forward to seeing and talking to you soon.
All the best,
Syntal Investment Team