Market Pulse

This weekly publication provides a brief note on market views heading into the week, highlights what we're watching, and important news ahead.

Jeff Terrell, CFA

Senior Investment Strategy Analyst

Truist Advisory Services, Inc.

Chip Hughey, CFA

Managing Director, Fixed Income

Truist Advisory Services, Inc.

Dylan Kase, CFA

Investment Strategy Analyst

Truist Advisory Services, Inc.

In focus

The third quarter came to a bumpy end, with the S&P 500 achieving a 5% pullback, which had eluded the market to this point. Since 1980, there have only been two years that did not see a 5%+ pullback –1995 and 2017. Despite large cap value outperforming growth during the month of September, large cap growth had a strong showing and outperformed value by 2.7 percentage points during the quarter. This was in line with many other trends we saw during the third quarter, including a resurgence of the technology sector, the 10-year yield retracing some of its early-year rally (though this changed in the last 10 days of the quarter), and small caps lagging. This coincided with the spread of the Delta variant delaying some economic activity, elevated inflation readings, and continued supply chain bottlenecks –all of which weighed on consumer sentiment. As a result, all of the aforementioned areas of the market, which were closely linked to the reflation trade, ran into some headwinds.

While the U.S. had its weakest showing since the first quarter of 2020, U.S. equities still outperformed their international developed and emerging market peers. Emerging markets (EM), an area we have been underweight since May and where we continue to have a negative outlook, had an especially tough third quarter given concerns around the ongoing crackdown on the private sector by the Chinese government. Additionally, the debt crisis at Chinese property developer Evergrande is weighing on sentiment. Given that China accounts for roughly 34% of the EM index, developments in China will have a large impact on the asset class as a whole.

A look back

  • Global equities finished lower for the week with the MSCI ACWI having its worst week since February. Stocks in the U.S., international developed, and emerging markets all slid last week.
  • Political wrangling over the bipartisan infrastructure package and a reconciliation bill continued last week as disagreements remain between Democrats about the size and scope of the reconciliation bill.
  • President Biden signed a bill to avoid a partial government shutdown and fund the government through December 3.

A look ahead

  • The coming weeks will see Capitol Hill’s turn on the carousel of concerns as several important votes are coming up, including on the debt ceiling, which the Treasury estimates will need to be addressed by late October.
  • House Speaker Pelosi suspended a vote on the bipartisan infrastructure package, which was already passed by the Senate, until October 31.
  • Economic data: Factory Orders, Durable Goods Orders, Markit& ISM Services, Nonfarm Payrolls, Wholesale Inventories, and Unemployment Rate.

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