We are excited to head into fall with its cooler temps and Halloween coming later in the month!
- All equity benchmarks were negative in September, with the exception of MSCI Frontier Markets (+1.2%).
- As a whole, REITS performed the worst (ex-US REITS declined -5.9%) with the Russell 1000 Growth declining -5.6%.
- The S&P 500 fell -4.7% in September, its worst return since March 2020, when it fell -12.4%. In fact, in the 19 month span from March 2020 through September 2021, the S&P 500 had only had five months with negative returns.
- Over the last one year, all equity returns are still (highly) positive.
- In last month's email, we noted that while we weren't predicting a downturn in September, we reminded everyone to not only look for rebalancing opportunities but to also continuously manage client expectations. And while we are not market prognosticators at East Bay, with the possibility of inflation not being as transitory as initially expected, the potential for the Fed to pump the monetary policy brakes in the next few months, the expectation for continued supply chain disruption, and the continuation of the Delta variant, it is possible we will see more bumps in the road ahead.
In fixed income:
- Like equities, all indexes shown were negative for the month of September, with the exception of the 3 Month T-bill, which almost eked out one-half-of-one-basis point return (still rounds to 0.0%).
- Longer term Treasuries were hit the hardest, falling -2.9% in September and also -10.1% for the last 12 months.
- Interestingly, the 10 Yr Treasury was at 1.32% as late as September 22 before shooting up 20 bps to end September at 1.52%. This upward move came just after the Fed announced it may be ready, as soon as November 2021, to reverse course from its pandemic-induced easy monetary policies. The theory is the Fed needs to end its bond purchasing (i.e. tapering) before it can raise short term rates (i.e. liftoff). And while only half of Fed officials believe rates will increase towards the end of 2022, the concern is that if inflation is not transitory, the Fed may be pushed to raise rates sooner than currently expected.
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As an additional note, please keep in mind that these reflect historical performance of the current models, not necessarily how accounts were invested in the past.