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Market Dashboard

- September 30, 2021




The speed of the reflation through 1H21 increases the odds that 2H21 will see decelerating growth and inflation (with increased volatility)

Continued deceleration expected in year-over-year growth and inflation, but absolute inflation level still expected to be elevated in 2022



Global manufacturing activity improved at a slower pace in August with developed countries fairing significantly better than emerging countries

65% of U.S. population has had at least one dose whereas 56% are fully vaccinated

Industrial production and leading indicators have peaked as base effects have waned

Trend of U.S. unemployment claims and equity drawdowns begs question: will this cycle peak before the labor market is healed?

Global inflation remains elevated due to higher commodity input costs, labor tightness, housing prices, etc.

Price increases have decelerated ahead of indicators, but trend remains intact; capacity utilization has started to normalize

Market-implied inflation expectations remain elevated; the market may be starting to question the “transitory inflation” narrative

Real yields have continued to trend lower; gold was rallying, but weakness continues after initial selloff on July Payrolls data

Relative rate expectations are getting dramatic, driving dollar strength in recent months

Expansion continues – three-month average increase of $92 billion brings Fed balance sheet to a staggering $8.4 trillion


U.S. large cap stocks fell the most in September as interest rates rose and valuations remain higher than in international and emerging markets

FAAMG underperformed S&P 500 ex-FAAMG by 4% in September


Sales and earnings growth expected to decelerate against tougher comps in 2H, but still to remain strong for the rest of the year

The VIX rose over 30% in September as the S&P 500 declined just 4% from its all-time high

Unprecedented policy support has helped 2021 become one of the least volatile years for stocks in half a century

U.S. equity valuations remain stretched, but strong earnings growth has closed the gap dramatically since the start of the year

Cyclically-adjusted P/E (CAPE) multiples by country; >4% yields in Turkey, Russia, Brazil and United Kingdom

In recent pullback, equity sentiment dropped sharply from high levels; sentiment is no longer a near-term risk factor

Value has outperformed growth since the vaccine announcement; growth’s recent outperformance may be a sign of the trend reversing

Growth valuations remain substantially elevated versus history, value valuations below average

EM equities remain relatively cheap vs. developed markets, but “value trap” risk remains due to less policy support and slowing growth rates

The weight of technology and consumer discretionary stocks in the S&P 500 fell slightly to 39% in September, still near record high

Renaissance IPO Index fell in September and is now 16% off of ATH, S&P 500 is down 4% from its ATH


High yield bonds and bank loans held up well in September, outperforming other fixed income and credit categories

Treasury yields rose in September as inflation remains elevated and treasury issuance is expected to accelerate in 4Q

The Treasury yield curve has steepened modestly year to date

3-month/ 10-year treasury spread widened in September potentially on supply and inflation concerns

Muni-treasury ratio: short-term muni yields look relatively attractive while LT munis are only slightly above Treasuries on a taxable-equivalent basis

Mortgage rate spread vs. 10-yr Treasury narrowed in September

Credit spreads below median across sectors with very few pockets of opportunity

Credit spreads were mixed in September, broadly remain near June lows

High yield-to-IG muni spreads near tightest levels since 2007

High yield spreads through the COVID-19 crisis speak to episodic nature of volatility


Performance across real assets was mixed in September

Crude and gas inventories rose modestly but remain near lowest levels in 5 years

As expected, the snapback in energy consumption is outpacing production; production may match consumption in 1Q 2022

Putting the rally in broad commodities in context

Real yields and aggregate amount of global negative yielding debt fell in September, gold weakness continued


Closed-end funds showed weakness in September but are still outperforming the opportunistic space year-to-date

CEF discounts widened in September, remain >1 σ above average

CEF discounts mixed by sector, taxable bond CEFs still trading at a premium


U.S. Dollar Index will be driven by real yields and relative deficit and monetary policy expectations of Fed, ECB, BoJ

Modest improvement in twin deficit may be providing some support for USD

Futures spec positioning shows shorts in several commodities, U.S. tech positioning (NASDAQ) turned bearish in September

Copper/Gold ratio corroborated the local high in Treasury yields, potentially signaling an increase in rates

Expected returns for passive “60/40” portfolio near all-time low

The case for a structural change to strategic 60/40 allocations


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Asset class performance was measured using the following benchmarks: U.S. Large Cap Stocks: S&P 500 TR Index; U.S. Small & Micro Cap: Russell 2000 TR Index; Intl Dev Large Cap Stocks: MSCI EAFE GR Index; Emerging & Frontier Market Stocks: MSCI Emerging Markets GR Index; U.S. Intermediate-Term Muni Bonds: Bloomberg Barclays 1-10 (1-12 Yr) Muni Bond TR Index; U.S. Intermediate-Term Bonds: Bloomberg Barclays U.S. Aggregate Bond TR Index; U.S. High Yield Bonds: Bloomberg Barclays U.S. Corporate High Yield TR Index; U.S. Bank Loans: S&P/LSTA U.S. Leveraged Loan Index; Intl Developed Bonds: Bloomberg Barclays Global Aggregate ex-U.S. Index; Emerging & Frontier Market Bonds: JPMorgan EMBI Global Diversified TR Index; U.S. REITs: MSCI U.S. REIT GR Index, Ex U.S. Real Estate Securities: S&P Global Ex-U.S. Property TR Index; Commodity Futures: Bloomberg Commodity TR Index; Midstream Energy: Alerian MLP TR Index; Gold: LBMA Gold Price, U.S. 60/40: 60% S&P 500 TR Index; 40% Bloomberg Barclays U.S. Aggregate Bond TR Index; Global 60/40: 60% MSCI ACWI GR Index; 40% Bloomberg Barclays Global Aggregate Bond TR Index.