The S&P 500 Dropped 4.8% in September

November 3, 2021

Earnings are the fuel that drives the train and the S&P 500 dropped 4.8% in September on concern the Delta variance may have slowed economic activity during the 3rd quarter.  This slowdown could translate into reduced revenue and net income for corporations that would weigh on the market.  By the end of October nearly 50% of the companies in the S&P 500 had reported results and 83% of them reported Q3 results that were above analysts’ expectations.  The month began with the banking sector reporting stronger than expected results and, as the month wore on, we had similar news from virtually every segment of the economy.  The relief rally that began the first week of the month continued throughout the month, not only erasing all the loss for September, but sending the S&P 500 to a new all-time high.  At the end of the month the widely followed index had gained 6.9% for the month, its best monthly performance for all of 2021 and its best October performance since 2015.  The index is now 22.6% higher for the year.  Oil kept pushing higher, gaining another 11.6% in October which brings the gain for the year to 75%!  Gold gained 1.5% for the month but is still down about 7% for the year.

The month began on a Friday with news of Merck’s new pill, a Covid therapeutic that is 50% effective, sending the S&P 500 up more than 1%.  During the first full week of the month, we learned economic activity in both the manufacturing sector and the service sector continued to growth in September.  At the end of the week the government reported a mere 192,000 jobs were reclaimed in September as the mystery of the missing workers continues.  6 trading days into October the S&P 500 had already gained 2%.  The second full week began with a bank holiday (Indigenous People Day) followed by a week of earnings from the major banks.  Rising interest rates are good for bank earnings which were expected to be good, and they were.  At the end of the week, we learned retail sales were up .7% in September while economists had been looking for a .2% decline.  The S&P 500 finished the week adding another 1.8%.  The third full week saw more strong earnings reports that helped the relief rally continue to drive the S&P 500 higher nearly every day.  At one point the widely followed index had moved higher for 7 consecutive days and gained another 1.7% this week.  The final week was more of the same, with corporate earnings reports showing a strong economy that was exhibiting very little concern about Covid.  The S&P 500 pushed to multiple new all-time highs during the week ending the month on a strong note.

November is historically a good month for the market and is the start of a 3-month period during which we have traditionally seen 60% of all gains for the year.  The odds of the market being higher at the end of January are more than 65%.  Remember, history is merely a guide and not an absolute.  Most of us remember the 9% decline in December of 2018.  Yes, it was mostly erased by the January 2019 rally, but that move points out that historic trends are simply a guide.  We come into November with the market close to an all-time high and valuations at levels that are considered rich.  Q3 earnings will be reported into the first half of November, and if the results we saw in October continue, we expect the market to move into uncharted waters.  Bull markets do not die of old age.  If earnings continue to grow, and economic activity continues to expand the market will continue higher.  Our GDP is 70% driven by the consumer so we will closely watch consumer behavior.  Barring some Black Swan event, the market appears to be moving higher and we will continue to buy dips.

If you know someone who would be interested in learning more about Greenberg Financial Group please contact us at 520-544-4909, or visit our NEW website at www.greenbergfinancial.com. As always, the key to successful investing is to have a portfolio that is consistent with your investment objectives and risk tolerance. We invite you to listen to our weekly Money Matters radio show which airs every Sunday Morning from 8:00 AM to 10:00 AM on KNST AM 790.  You can also listen to us on iHeart radio, follow us on Twitter @gbergfinancial or on Facebook under Greenberg Financial Group.

 

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