On September 2, 1986, I opened the doors to what was to become Legacy Wealth Management. Me, my desk, phone and an empty four drawer legal file cabinet were all waiting for my first client. Maybe that’s why I love the Fall. Maybe it’s because that’s when school started, and I loved school. A new year with new teachers and up until middle school, a new lunch box. Lunch boxes became uncool in middle school. Maybe it’s the cooler mornings but still warmer afternoons. I don’t know what it is, but Fall energizes me and I love the season.
Fall can also be a crazy time for our financial markets. September boasts having two of the largest one day point drops in market history. October is remembered for two stock market “crashes”. One in 1929 and one in 1987. But did you also know that October has been the month where more bear markets have ended than any other month? Then in November and December you generally have more stocks trading down than up as people rebalance their portfolio’s and do some tax loss harvesting.
I think Fall 2021 promises to be interesting. As of this writing 90% of companies that have reported second quarter earnings have beaten their consensus estimates, but many are saying that future earnings could be lower. Since they are comparing this years earnings to last year when we were in the middle of the pandemic, what is it really telling us? Inflation is upon us. The Federal Reserve tells us its transitory. I’m not sure the Fed really knows what inflation is running at. Food and energy prices aren’t considered to be a part of the Consumer Price Index. That is where most people spend most of their money. The Fed says prices are up because we are coming out of a pandemic and the supply chain is bottled up with increased demand for goods that producers don’t have because they are still trying to ramp up production after having been shut down due to COVID. The Fed believes that production will increase and the supply bottleneck will disappear and so will inflation. I don’t necessarily buy that. With all the stimulus money, expanded unemployment benefits, non- eviction mandates and now, monthly checks being issued to those taxpayers who receive the child tax credit, there is a lot of money in the economy now. Anytime you have too much money chasing too few goods you have inflation.
All this money in people’s hands has taken away the incentive for a lot of people to look for work. There are help wanted signs all over the place and employers can’t find workers. If you can’t find workers to come in to make the goods and services that everyone is demanding, then how can you fill the supply chain? The only way to attract workers is to pay higher wages, which leads to higher inflation. The Fed has said they aren’t raising rates until 2023. If the current inflation remains, they may make it through 2021, but they will raise rates in 2022.
In addition to corporate earnings and inflation, COVID is still out there. Case numbers seem to be rising again just as schools are reopening. CDC is recommending people mask when indoors, even if you have been vaccinated. What will happen if case counts keep rising? Will restaurants have to go back to carry out only? Will airlines have to not fill planes so there is social distancing? Will stores have to go back to limiting the number of customers they have in the store at the same time? A lot of small businesses are just holding on by their fingernails. They won’t survive another shut down or even a partial return to
Yep, Fall of 2021 could be interesting. Glad I’m energized. I think I’ll go buy a new lunch box. At my age, “cool” is anything I want it to be! Maybe a Yogi Bear, or the Flintstones…
These are the opinions of Legacy Wealth Management, LLC and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.
Mike Berry is a Registered Representative offering securities through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Legacy Wealth Management, LLC and Cambridge are not affiliated. Cambridge does not offer tax advice.
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