facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause

Continuum Monthly Update October 2021

US Market

  • The S&P 500 closed October at a fresh all-time high of 4,605
  • All-time highs were also made by other popular indices like the Dow Jones Industrial Average and the Nasdaq 100
  • Contrary to a popular line of thinking that says “what goes up, must come down”, all-time highs should be regarded as a positive for the market as it shows the collective of market participants willing to pay higher prices for stocks
    • Of course, we at Continuum are always trying to look ahead so we are by no means complacent given this information
  • The saga continues for US Small Caps as they eked out a small gain this month but have yet to join the “all-time high” party
    • As we have mentioned previously, the sideways movement of prices in these smaller companies since February is a welcome digestion of the massive run we saw at the end of last year and into this year
    • Keep an eye here as a move higher would add one more arrow into the bulls’ quiver
  • Commonly referred to as the “Fear Index” by financial television, the Volatility Index (VIX) closed with a reading of 16.26
    • This is a measure of the volatility expected by options traders in the stock market and a lower number means lower expected volatility
    • As you can see in the following chart, we are right around the 10-year average for this indicator
    • You can also see the incredible fear present in the market in March 2020, as if we needed a reminder of that

International Markets

  • European stocks enjoyed a positive month as they grew around 5%
  • Japan, which holds a 23% weighting in the popular MSCI EAFE index, struggled to keep up as it lost 1.9% in October (as measured by the Nikkei 225 index)
  • MSCI EAFE is the main index for international economies that are classified as “developed”
    • The classification is dependent on many things, but per capita Gross Domestic Product is the main metric
    • Other factors like literacy and infant mortality rates are also considered
    • China, despite being a behemoth of an economy is still classified as “emerging” due to some of these factors
  • Speaking of China, their stocks were slightly positive this month after sustaining heavy selling pressure the last few months
    • Is this a case of investors looking for a discount on companies like Alibaba and Tencent or is it a sign of things to come? Tune in next month to find out
  • Using higher oil prices as a tailwind, a fund tracking Russia’s stock market is back to levels not seen since 2012

Fixed Income/Bonds

  • The yield on the 10-year US Treasury closed at 1.558%
    • This is still historically very low, but it has been steadily increasing since investors rushed to safety during the depths of the market panic in 2020
    • As a reminder, higher yields mean that the price of bonds is going down
      • The optimist says that this is due to higher growth potential in other areas of the market, so people are more comfortable with riskier investments
      • The pessimist says that it’s due to higher inflation right around the corner, so people don’t want to hold something that pays a fixed rate
      • The actual answer is unknowable at this time, but it’s probably a combination of both
  • Something to keep an eye on: yields on "junk bonds" (see below)
    • The yields are historically low, denoting that investors are comfortable with loaning their money to some of the riskiest companies
    • However, the yields have been climbing since July which could simply be investors taking profits
    • The low absolute levels are still part of the “good news” side of the ledger, but the recent trend is something we are monitoring

In Case You Missed It

We wrote a blog you think you might like:

Debt: It's Not a Four-Letter Word

Closing Thoughts

As a reminder, planning is never stagnant.  As life changes, you should make sure that your plan does as well to ensure your goals are met.  Please remember that along with managing your investment portfolio, we do offer insurance solutions as well as tax planning and preparation services.  A coordinated effort amongst these different components often achieves better overall results.  We’re here to help.

Interested in learning more? Drop us a line.