- For October, the US equity markets bounced back in a major way from its negative month of September. The S&P 500 returned + 6.9% in the month and is now + 22.6% on the year. The NASDAQ index returned + 7.2% in October and now is + 20.2% year-to-date. The Russell 2000 Index, which measures the performance of smaller sized companies returned + 4.2% in in October and has returned + 16.3% for the year.
- International Equity Markets were somewhat mixed in October. The developed countries as measured by the MSCI EAFE Index returned + 2.4% in the month, its performance for the year now stands at + 8.75%. The MSCI Emerging Markets Index was slightly positive in October + 0.93%, bringing its year-to-date performance to – 2.05% for 2021. The Brazilian equity markets as measured by the BOVESPA stock Index sold off in October loosing – 6.74% in the month and now sits at – 13.0% for 2021 through the end of October.
- US Fixed Income performance was flat, as measured by the Bloomberg US Aggregate Total Return Index. October’s performance was – 0.03%, bringing its total return for the year to – 1.58% through the end of October. In the commodities arena, energy demand and oil prices continued higher as the price rose + 11.4% in October bringing the spot price of a barrel of oil to $83.50. For the year Oil has appreciated + 72% in 2021. In the precious metals space Gold was up slightly in October and is now down – 5.8% on the year pricing at $1,783 / oz. Silver was up over 8% in the month of October and now at $23.95 / oz. ha a performance of – 9.0% on the year.
What we Did:
- Coming off of the September sell off, Proxy actively realized losses in a few select positions at the start of October. Providing after-tax alpha for our clients in tax sensitive portfolios is an ongoing objective and volatile markets allow for the best opportunity to do so.
- In addition to selling and trimming positions at a loss for tax harvesting, we used the down markets to add to a few current positions, as well as initiate some new ones. Mercadolibre Inc. (MELI) added to the growth portfolio is one such example.
- We stayed the course in each of our strategies and in our Global Core Equity, we had a timely increase our exposure to global the semiconductor industry via the ETF, SMH, as well as to US Tech via QQQ.
What we are Watching:
- Inflation pressures are starting to be felt more and more from the price of just about everything. Year over year the Consumer Price Index rose 5.4% recently well above analyst expectations, this was the 6 month in a row that the number has been higher than what the government experts predicted. The Federal Reserve Bank is expected to begin to wind down the $120 Billion a month in bond purchases which could allow interest rates to rise. If there is no buyer for bonds at these low interest rate levels, we expect rates to rise.
- Company earnings for the third quarter are continuing to show positive results. Supply chain concerns although still present are easing, one example being the microchip shortages aren’t as bad as before. Corporate America has taken full advantage of the low interest rate environment by refinancing their liabilities into newly issued, lower yielding corporate bonds. As a result, these companies have a cleaner balance sheet and have the funds available for stock buy-back programs, further helping their earnings per share numbers. The ability to produce solid earnings is certainly a reason to remain bullish on equities.
- The Democrats continue to try to pass through Congress their legislative agenda but still can’t get everyone onboard. With such a slim majority in the Senate, 1 or 2 senate votes can really matter which is what we see happening, which leads to nothing getting done. There has been talks about a billionaire’s tax, increasing corporate tax rates, and several other proposals to help pay for their legislative packages but nothing has passed through both Chambers of Congress and made it to the President’s desk for him to sign. Recent elections for governor in Virginia and New Jersey show the public is losing confidence with the Democrats in power. We will continue to see what comes out of Washington maybe they can reach an agreement on the infrastructure bill which would be a nice catalyst to certain areas of the market.
Disclaimer: Investing in financial markets carries risk, including loss of principal. You can lose some or all of the money that is invested. Past performance is no guarantee of future results. The material contained herein is for informational purposes only. This document does not constitute a recommendation of securities, securities portfolio, transactions or investment strategies. The projections were created based on hypothetical information, there is no guarantee that any of them will come true. Proxy Financial is a registered investment adviser. Proxy and its Financial Advisors are not licensed in all states to offer securities and insurance products. This site is not a solicitation of interest in any of these products or service in any state which the registered representative is not properly licenses.