On today's episode of the podcast, Casey Smith and Brad Lyons, CFP® go over how the markets performed in Q3 2021 and give their take on everything.
At Wiser, we review each quarter and how they compared to previous quarter. We have noticed a lot fear in our clients when it comes to selling things. On the news, people are told they need to buy gold, sell "XYZ" stock, or to stick to bonds. We want to go over the facts of the stock market and the trajectory of our economy to calm these fears. While reviewing the quarter is important, we believe that looking at the market long-term is the most accurate.
Casey coined 2020 the “millennial crisis.” Millennials are known to want things immediately and the same happened in the 2020 stock crisis: the market fell fast, and it recovered fast.
According to Brad, the economy is preforming very well. At the beginning of Q3, the economy was growing at a 6.2% growth rate. By the beginning of September 2021, the market was at an all-time high. This was great, but it’s healthy to have a dip. Therefore, we saw the 2nd pull back in the market at 5% by the end of September. If you go point to point in September, it was a flat point – the rise and fall was flat on the market.
Small Cap funds have had a terrific run in the last 12 months. Prior to August 2020, we had a small holding in small caps, but we moved to an 11% allocation in our all-equity portfolio to take advantage of their rise. Over the last year, technology and real estate have been performing well. They were both up almost 30% in one year. Overall, it was a quarter in which we did well to maintain the asset allocations.
Most of the money in any portfolio is going to be in Large Cap stocks. Lately, there has been a boom in marketing for ESG funds. For example, BlackRock was requiring clients to purchase them in their funds. Each quarter, Casey looks at the ESGU funds and how they are preforming against their benchmark. After doing research, he found that the S&P 500 ranks the ESGU AA. This is the same rating as IVV, which is the S&P 500 stock. BlackRock and others are doing this because it can increase their revenue by 5x. It ended up being a marketing scam. Many ESG funds are this way – they don’t actually help social issues, they are just a way for companies to make more money.
There are all kinds of forms of investing. At Wiser Wealth, we construct portfolios that achieve goals. Therefore, the investments themselves are less important. Our purpose is to create a portfolio that achieves the client’s goals.
1.65M more people are working at the beginning of Q3 2021. The unemployment rate is decreasing which helps the economy. Today, it takes around 50 days to fill a job roll. We think that it is because people are realizing that they care more about their quality of life than the amount of money they are making. For example, salesmen that travel 2-3 times a week and make a lot off that are making the same and working remotely. They are willing to search for another job in order to be at home with their families rather than stay at an inflexible job.
Interest rates are going up, but long-term they are not increasing. According to a Vanguard report, we see inflation going to 2% in 2022. We think that as long as supply-chain issues are fixed (more goods are available), we will see a decrease in inflation. We are an expanding economy right now.
7:35 Was 2020 a True Market Crisis
7:53 Overall Economy Q3 2021
10:53 Hot Asset Class and Sections in Q3
16:24 ESG Fund Performance
29:44 Investing in Client Goals
32:43 The Unemployment Rate
36:27 Interest Rates
Learn more about Brad Lyons.
Learn more about Matthews Barnett.