Search
  • Rmumy

"The Fall is Here...or is it?"

October 2, 2021


Fall is here! Well…I think it’s supposed to be. With football season comes some interesting volatility. Lots of yelling at TV screens and throwing remotes as well as choppiness in the capital markets. Why this is, while we have some theories, we don’t truly know. September through mid-October is the most volatile timeframe of the year for investors from a historical standpoint. No one can do anything about the turbulent markets…we can save our vocal cords & remotes though! Seeming to keep with history, the so called “Wall of Worry” started to grow in September as various risks increasingly dominated the attention of investors.


Below is a concise list of current market participant concerns followed by our take on what we think this means at present. Remember we can and have shown we will adjust quickly to new information.


Delta variant and the on-going global economic disruption from Covid-19

  • Cases are peaking and we believe the world (and markets) are gradually learning to live with the virus. As a result, markets could react less and less to any new outbreaks/variants and the news cycle will move to other items

The end of accommodative monetary & fiscal policy amidst rising inflation.

  • For Federal Reserve Chairman Powell and his international counterparts, the combination of slowing growth and stubborn inflation is a challenge. Globally, fiscal policy support is set to slow into 2022 after governments ran-up the biggest debts since the 1970s.

  • In our opinion, policy is still accommodative in absolute terms. Supply chain bottlenecks could begin to dissipate…although it’s far from happening now. Reports out of Asia give room for some optimism as manufacturing activity there rebounded in September after Covid-19’s grip on several countries loosened, allowing the easing of lockdown measures that had crippled factories.

Increasing anti-capitalist policies & debt in China.

  • In addition, an on-going energy shortage has forced Chinese manufacturers to curb production and prompted economists to cut their growth forecasts for the country. Bloomberg Economics expects the power shortages to have the biggest hit to expansion since the nationwide lockdown when the pandemic first erupted.

  • While we acknowledge this could be alarming when viewed through a purely western/American lens, recent events in China are simply further evidence that leader Xi Jinping is using his consolidated power to pursue a domestic agenda meant to correct perceived societal imbalances at home. Risks from China are not new and those calling for a market crash based on this alone have been wrong for roughly a decade. If capital exits China based on these risks, we believe it is likely to go into US assets. In a highly interconnected global economy, capital will flow to/from areas. We gently suggest ignoring scary, “end of times” headlines.


As our long-time clients know, we are hyper-focused on potential risks all of the time. We’re not simply looking at events and data when they start to make headlines. We believe this allows us to stay grounded when markets become turbulent as we’re convinced that is a key in not making quick, emotion-based decisions. Especially when these emotions are rooted in fear vs. in data.


Below are some high-level points on our thoughts & recent moves we’ve made with risk-management in mind:


  • Several months ago, we reduced the duration/average maturity of our client’s fixed income holdings. We have been rewarded as rising longer-term interest rates recently have sank the aggregate US Treasury bond index to its worst performing year since 2013. We by and large missed much of this.

  • We came into September with a slight defensive tilt having taken profits from several positions during the late summer months and left them in cash temporarily. We used part of the cash to enter Small-Caps prior to the latest Fed meeting. Our team continues to look for opportunities in areas of the market domestically that we expect to perform strongly as the economy & gov’t policy continues to normalize from the Covid-19 anomalies.

  • On-going effort is being made to better understand the international environment in particular the dynamic in China. Unfortunately, we feel the majority of our industry is either over-sensational on China risk or willfully ignorant. We’re striving to stay grounded in the facts as they are…not as we want to see them.

  • We continue to monitor institutional positioning closely. These big pockets of money can and will “move markets.” By and large, they remain fairly neutral in their positioning…far from being overly bullish or “over their skis” invested in equities. With the best historical season for equities around the corner, we remain aware that large pots of money could chase equities higher before the end of the year.

Rigid on process and flexible on outlook is how we will continue to manage your hard earned assets. It is with great honor that we get to do what we do every day. That gratitude continues to motivate and excite us about the future. As markets ebb and flow, we continue to believe that it is critical to remember that the plan remains the same...to grow wealth and manage risk for the long term.



Ryan A. Mumy, CFP®, AIF®

Chief Investment Officer

rmumy@capital-invest.com



Disclosures: The information provided in this paper is for general informational purposes only and should not be considered an individualized recommendation of any particular security, strategy or investment product, and should not be construed as investment, legal or tax advice. Capital Investment Advisory Services, LLC makes no warranties with regard to the information or results obtained by third parties and its use and disclaim any liability arising out of or reliance on the information. This information is subject to change and, although based on information that Capital Investment Advisory Services, LLC considers reliable, it is not guaranteed as to accuracy or completeness. Source information is obtained from independent financial data suppliers. For investment related terms definitions, please visit: www.investopedia.com Past performance is no guarantee of future results. Advisory services through Capital Investment Advisory Services, LLC. Additional information about CIAS and its From ADV Part 2A are available on the SEC’s website at www.adviserinfo.sec.gov
15 views0 comments

Recent Posts

See All