IRONY – noun – the use of words to express something other than and especially opposite of the literal meaning. (Webster’s Unabridged Dictionary).
As I predicted last month, September 2021 turned out to be the worst month for stocks since – wait for the reveal –September 2020. Lots of factors other than historical seasonality played a role in the carnage. The Delta variant of the Coronavirus continued its spread throughout the world. Supply chain problems affected a wide variety of industries, from automobiles to construction to apparel. Congress faced a possible government shutdown as well as infighting on a Democratic signature infrastructure bill. Inflation remained a forefront topic, with rising prices in natural gas having a worldwide effect. The Federal Reserve announced its plans to taper asset purchasing, and the bond market responded by increasing the yield on the benchmark 10 year Treasury from 1.3% to 1.55%. Unemployment remained stubborn as businesses struggled to keep workable staff levels. The bottom line is that major equity averages suffered anywhere from 2-4.5% losses. Now we wait for further direction. Will October show any signs of rebound or will the slide become an avalanche?
Before we opine on what to expect, let’s talk about irony. I don’t know about you, but I’m becoming increasingly angry and tired over the mixed messaging that we see on a daily basis. Here are a few examples of ironic duplicity:
1) Anti-vaccination folks don’t believe in the science behind the Moderna, Pfizer, or Johnson & Johnson alternatives, but they sure do trust the science of a hospital emergency room if they contract COVID-19.
2) The vast majority of folks fomenting anti-vaccination rhetoric have already received the proper protective dosage. FOX News has basically mandated compliance for its employees and members of Congress continue to steadfastly refuse to answer questions regarding their own status. (No, it’s not a HIPAA issue.) Donald Trump was one of the first people in the world to get his initial shot.
3) Alexandra Ocasio-Cortez wore a dress to the New York Metropolitan Museum of Art annual fund-raising gala that had “Tax the Rich” as a major part of its design. The ticket price for this event was a mere $30,000. Who paid for hers?
4) Texas Governor Greg Abbott believes in the rights of individual freedom with regard to mask mandates. He also led the passage of one of the most draconian anti-abortion laws in the country, thus depriving women in his state the right to have freedom of choice over their own bodies.
5) Pro-life governors and state legislatures don’t seem to be concerned that their states are COVID hotbeds. According to CNN, the highest 11 states in cases, hospitalizations, and deaths per 100,000 people are all Republican controlled.
6) Parents who are Coronavirus anti-vaxxers must give their children rubella, mumps, and measles preventatives in order that they may be able to attend school. If America had this sensibility (or lack thereof) decades ago, we’d still have smallpox and polio.
I bring up this COVID irony because it’s having a direct effect on our economy and our lives. Aside from being a major part of the supply chain problem, it also has significant relevance for the travel and entertainment sectors. On a personal note, my wife Lynne and I had to cancel a long-awaited European vacation last month because the Netherlands imposed a mandatory ten day quarantine period. Amsterdam is a lovely place to spend a week and a half, but only if you’re planning to do so.
The bottom line is that I’m a bit unclear about short-term market direction. October isn’t generally positive from a seasonal perspective and further corrective days could easily occur. However, the Volatility Index isn’t portending a sizable plunge yet. Demand isn’t slowing down… just the supply. Major companies have learned to make the most out of COVID disruption and generally have strong earnings and balance sheets. Even though interest and mortgage rates are rising slightly, we’re still in a very inexpensive borrowing environment. Proposed tax changes may not become a reality. It is also hoped that there will be a Tamiflu-like prophylactic by the end of the year.
Wall Street is quite professional when it comes to irony. In the face of difficult news over the past twenty months, portfolios have made nice gains. We all need to keep focused on the future rather than the present. Perhaps the return to normalcy hasn’t been as swift as we had predicted, but we’ll get there. RC, Ruth and I are here to assist during these unpredictable times. Please feel free to contact us with any needs or questions. Stay safe and stay sane. We look forward to seeing you soon.
The opinions expressed in this letter are those of William Schiffman and should not be construed as specific investment advice. All information is believed to be from reliable sources; however, no representation is made to its completeness or accuracy. All economic and performance information is historical and not indicative of future results. Diversification cannot assure a profit or guarantee against a loss. The S&P 500 Index is a broad based unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. Indices are unmanaged and do not incur fees. One cannot directly invest in an index.
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