As I mentioned in an email last week, welcome to the final quarter of the year. Since another quarter is in the books that means it is time for your quarterly economic update. Let’s see what the data shows for a quarter that ended with a wild ride in the market.
- Although the S&P500 was down for September, it turned out slightly positive for the quarter.
- Through the 3rd quarter, the S&P is up just under 16% for the year.
- Small Value leads the main US asset classes being up 22.9% year to date. Good news for those Dimensional Fund holders, finally. Small Growth brings up the rear at a gain of only 2.8% for 2021.
- Since I know no one reading this is a day trader, let’s look at the 10-year annualized numbers. Large Growth leads the pack with annual growth of 19.7%. Unfortunately, those longer-term Dimensional Small Value numbers aren’t so good with 13.2% annual gains. Although they are the worst performing of the main asset classes, it is still a solid annual number. I just like picking on Dimensional.
- If we were to look at Sector performance, Financials led the way for the 3rd quarter with gains of 2.7%. Industrials were the worst performing sector being down over 4%.
- So far this year, Energy is the best performing sector up nearly 43% (but it was down the 3rd quarter). Utilities is the worst performing up only 4.2% in 2021.
- This is probably not news to you, but jobs are hard to fill. According to a national Small Business Jobs report, 50% of firms have at least one job they are unable to fill. This is the highest the data set I have access to has ever reported, and the data goes back to 1975.
- Unemployment was at 5.2% for ending August 21. This is below the 50-year average of 6.3%.
- Wages increased 4.9% ending August 21. This number is above the 50-year average of 4%.
- Again, not a surprise here. Inflation is higher than the 50-year average. This is based on August 21 numbers. Headline CPI is running at 5.2% now which is above the 50-year average of 3.9%. Food is actually below the 50-year average. The culprit continues to be energy inflation. It ended August at 24.9%, well above the 50-year average of 4.5%.
- High Yield is the best performing fixed income asset class this year with YTD gains of 4.5%. Pretty much the rest of fixed income asset classes are negative for the year.
- Regarding equity asset classes, Commodities are leading the pack this year with gains of 29.1%. This is definitely an anomaly, in my book, as Commodities have averaged annual growth of -4% the last 15 years. Emerging Markets bring up the back of equity classes with YTD performance of -1%. As a whole, Fixed Income has performed worse with YTD returns of -1.6%.
- The top 4 performing asset classes the last full 15 years have been Large Cap (9.9% annually), Small Cap (8.9%), High Yield (7.5%) and REITs (7.1%). REITs stands for Real Estate Investment Trusts.
- Another piece of useless information. Since 1926, the S&P500 has enjoyed positive returns in 95% of all 10-year periods. In the last full 20 years, the S&P has an annual average of 7.5%. The average investor has done 2.9% during the same period.
- The final piece of information is hopefully some good news. Over the last 20 years, the Dow has averaged gains of 4.5% in the final quarter. This is compared to 1.2% average gains the other three quarters of the year. Let’s hope this trend continues.
Once again, I share this information as more of a FYI than to provide any sort of investment advice. Not that I would provide investment advice to someone who is not a client. This is just to cut through some of the noise that is shared in the world of financial pornography, like CNBC and the TV ads for gold.
Honestly, there are really only two uses for this information. First, is to make sure your CFP® is being timely in communicating with you. And more importantly, to impress your friends at Halloween parties this year😉 You know, so when your neighbor dressed as a vampire tells you how well his commodities have done this year you can keep in mind it has been an anchor on his portfolio the last 15 years.
I’m Dan Johnson, CFP®, founder of Forward Thinking Wealth Management. I run a flat-fee financial planning and investment management firm located in beautiful Akron, OH. Although I am in Akron, OH, I work with clients regardless of location. I cater to owners of equity compensation positions who are looking to organize their financial lives, keep more of what they make, and do the things they want in retirement and even now.