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Astoria Strategic Wealth

October 2021 Market Commentary


The third quarter of 2021 started out with continued strength across equity markets, before backtracking during the month of the September. Most headlines pointed to several issues that surfaced in the quarter as cause for the pull back, including geopolitical concerns domestically and abroad, economic impacts from the delta variant, concerns that continued supply chain disruptions and labor shortages may cause more persistent inflation pressures, and messaging from the Federal Reserve that they may begin scaling down the pace of their current quantitative easing before year- end, which is sooner than most expected. Overall, the US equity markets finished roughly flat for the quarter, international stocks fell modestly, and emerging markets trailed.

It is important to note that corrections and pull backs are a normal occurrence in the stock market. Over the last 40 years for example, the S&P 500 has experienced an average intra-year drawdown of 14%. It has been since early November 2020 that we last experienced a 5% drawdown in the S&P 500.

In fixed income markets, yields ended with little change from the start of the quarter and returns were also flat. While central banks globally remain accommodative currently, recent Fed comments have focused on continued strengthening of economic and employment conditions and expectations are that the Fed will begin reducing the pace of quantitative easing before year-end and that they will pursue further tightening of monetary conditions in 2022.

As long-term investors, we try to look past the headlines of the day and remember that there always exists any number of reasons to have concern and remember that the best approach is to focus on the long-term and try to tune out the short-term noise. Markets have shown a tremendous ability to reward patient investors who stick with a financial plan that meets their goals and objectives.

Each quarter we provide transparency and seek to clearly communicate what is driving performance for portfolios. However, as long-term investors we believe it is important to note that any single period (especially a period as short as a quarter) can be skewed or limited in informational value and stress the importance of the longer-term perspective on portfolio positions.

US Stocks

The US stock market finished essentially flat during the third quarter yet has appreciated over 30% in the past year. While value and smaller cap stocks performed strongly over the prior year, the trend reversed slightly during the quarter as large cap growth led the market. REITS performed well during the quarter and after several years of lagging have outpaced the broader market over the past year.


International Stocks

Internationally, emerging markets faced the greatest headwinds, driven in large part by weakness in China. Chinese stocks faced several challenges during the quarter, including regulatory changes and major financial issues for the property development company Evergrande, which captured significant headlines during the quarter due to concerns about their viability.

Developed markets outperformed emerging markets by a wide margin, declining a modest 0.5% for the quarter. Over the past year, emerging markets and developed markets have appreciated considerably, gaining 18% and 26%, respectively. Progress in the recovery from COVID continues across the globe and many major economies are rebounding along with the United States. Absolute returns have generally been strong over the last year, with Canada and the UK standing out as particular areas of strength.

Fixed Income

Yields were little changed from the beginning of the quarter, with returns effectively flat across the major fixed income sectors. After being bid up in the early stages of the COVID crisis, Treasuries have been the weakest area over the last year.

A general increase in rates over the prior year has resulted in modest declines in the US (Barclays Aggregate: -0.90%) and internationally (Global Aggregate ex-US: -0.92%). Corporates and municipal bonds have held up better than other sectors as strong demand and tightening spreads have contributed to positive performance over the last year.


We wanted to share a concept that we regularly discuss with clients. A common question that arises during times of turmoil or particularly high levels of negative news, is along the lines of “wouldn't we better sitting this out and waiting to invest until things are calmer/clearer?”

Unfortunately, the research and our experience indicate this is a futile endeavor. The below illustration highlights one of the primary reasons why. The stock market can move quickly, and even being out of the market for as few as the five best days over the last 20 years would have cut an investor's return by nearly 40%. Over 20 years, that is about 5,000 trading days, so missing the just 1/10 of 1% of those days has a drastic impact. Missing the 10 best days would result in a return less than half of that of staying fully invested.

Further, it is often after a market decline that these questions tend to become more prominent. However, the data shows that very often these best days occur within one month of the worst days for the markets. Being out of the market for even a small fraction of the days can have a major impact on a portfolio outcome.

A similar variation of this question that we have heard more frequently over the last year is “if markets are near all-time highs, shouldn't we wait to invest, especially given all the negative news?”

History shows us that market highs are actually very often followed by further market highs and using this in attempting to time market entry points can actually lead to lower results. JPMorgan looked at all the days that one could have invested over the last 30 years and separated out the results from investing on days when the S&P closed at all high time highs from all the others.

Interestingly, investing on days when the S&P closed at all-time highs actually resulted in slightly higher returns over the subsequent one, three, and five-year periods. While it seems intuitive to want to wait for a pull back or correction in markets to invest, the general long-term rise in equity markets can make the opportunity cost meaningful.