Third Quarter In-Review - October 2021

The upward trend in economically sensitive stocks paused during the third quarter.  The market has had to come to grips with a resurgence in COVID-19 via the delta variant, uncertainty emanating from Washington D.C. surrounding fiscal spending and taxation, and rising global geopolitical tensions.  Large growth stocks, led by mega-cap tech issues, were able to produce gains as many investors currently view them as “all-weather” stocks.   

The broader economy continues to recover. To date, this recovery has been characterized by unusually wide dispersions in outcomes for various industries. Consumer spending in restaurants, hospitality, and travel remains severely depressed, while housing, electronics, and durable goods are booming. As the expansion continues, we would anticipate activities in these industries to normalize and the result to be stronger growth in services more than offsetting inevitable declines in housing and durable goods spending.  The driving force will be continued progress in our fight against the pandemic, enabling more people to fully engage with the economy as they did prior COVID-19.   

Our belief in the durability of this cyclical recovery remains intact due to the strong balance sheets of businesses and the U.S. consumer.  Economic activity currently is being throttled by shortages of physical goods and willing workers in many industries.  Time and policy changes will alleviate both of these shortages.  The prospects for companies that benefit from a strengthening global economy look as good prospectively as they have in years.