CMP Financial Planning

Quarterly Investing, Market and Economic Overview – Q3 2021


American flag hanging outside. Red white and blue, stars and stripes.

How’s investing and what should investors know during the third fiscal quarter of 2021 and the COVID-19 pandemic. Stocks continued their upward trajectory for the quarter. The US stock market set new records, growing by 8.2% for the quarter and 44.1% over the past 12 months as the economy was still struggling from the pandemic. US stocks continue to outperform other asset classes.  

International investing and the stock market

International stocks grew by 5.7% for the quarter and 33.7% over the past 12 months. Emerging Markets climbed 5.1% for the quarter, but 40.9% over the past year. US Large Cap Growth stocks outperformed Value stocks for the quarter, but Value stocks year to date are up 17% vs 13% for Growth.

Small Cap stocks are up 62% from last year vs 43% for Large Cap. With interest rates beginning to rise, global bond returns decreased slightly over the quarter but show a small gain of 2.8% over the past 12 months. 

Investing and the COVID-19 pandemic

As vaccinations have increased and restrictions have largely been lifted, the economy has rebounded sharply. People are starting to spend on purchases that were put on hold during the COVID-19 pandemic. Robust consumer demand is helping to spur economic growth of 6.4% in the second quarter, with many economists predicting 2021 growth of 7% for the full year.  

Wages and payrolls are up, but many jobs are left unfilled. Job openings hit a record 9.2 million. Nonetheless many businesses are straining to find workers. Part of the reason employers are struggling is because not all workers have returned after being sidelined from the pandemic. The labor force participation rate of 61.6% in June is still down 1.7% below the rate before the pandemic. Many would-be workers still have coronavirus concerns or are struggling with childcare or are holding out for better opportunities.   

Many believe the current labor market mismatch between employers and would-be-employees will eventually return to normal as companies either continue to raise wages, provide training, or both.  

Current state of investing and the economy  

With demand and supply currently out of balance, the dark cloud on the horizon is inflation. Prices have risen sharply over the last quarter. Over the past 12 months inflation has risen by 5.4%, the highest level in 13 years. Core inflation, which excludes food and energy prices, is up a whopping 4.5%. The Federal Reserve and policy makers are expecting that this boost in inflation is temporary. The hope is that after supply and demand imbalances have worked themselves out, price increases will settle out closer to the recent trend of 2%.   

Ten-year bond yields, which tend to forecast inflationary expectations, have shrugged off any inflation fears and are actually down nearly 0.4% over the quarter. Bond investors for the time being are not worried about inflation nor the massive global government debt that is accumulating worldwide. 

We are pleased that many of you are taking vacations and making spending plans for the future. Not only are you helping the economy but no doubt benefiting your mental sanity after the long pandemic winter we have endured. For those needing extra cash to help these plans come to fruition, it is not a bad time to make a withdrawal since we are at market highs. 

Read our previous economic, investment and market overviews: