November 2021 -A bullish year-end setup

“This is the end of the pandemic” declared Dr. Scott Gottlieb this morning on CNBC. Hopefully, he didn’t speak to soon, but given the widespread availability of vaccines, antibody cocktails and two Covid pills (Merck and Pfizer) coming to market -it does appear we can finally claim victory.

The economy continues to strengthen, U.S. consumer household balance sheets remain very healthy with trillions of dollars in savings and money markets. Household debt service payments as a percentage of disposable income is at a 41-year low. The American consumer, which makes up about two-thirds of the economy, is in very good shape heading into 2022.

Yes, supply chain disruptions are still being felt across the country but over the past few weeks we are seeing signs that the worst of the supply issues may be ending. Although these issues lasted longer than most expected, the bottlenecks will continue to work their way out of the system over the coming months and should provide some relief on the inflationary front.

Corporate 3rd quarter earnings kicked off several weeks ago and have been nothing short of fantastic. To date, 481 companies within the S&P 500 Index have reported earnings and 86% have beaten analyst’s expectations.  Remember, earnings are the core driver of long-term stock returns, and these numbers continue to justify equity valuations at current levels.

In addition to earnings, this morning’s jobs report was better than expected. According to the Bureau of Labor Statistics, the economy added 531,000 jobs in October versus the 450,000 economists expected. This report shows clear evidence that the economy is reaccelerating as the delta wave abates, the end of enhanced unemployment benefits and widespread reopening of childcare facilities are aiding in individuals getting back to work.

Did you know that the next two months (November and December) are historically the best two months of the year for stock market gains? Year to date, the S&P 500 Index is up 25.10% and looking back at the index performance since 1952, it has never posted a negative return the final 2 months of the year after being up +20% through October. On October 29th, the S&P 500 passed our year-end target of 4,600 and given the current economic tailwinds, it’s providing for a bullish setup that should carry us through to year’s end.

We remain fully invested within portfolio allocations with an overweight bias to equities which means a slight underweight to fixed income. As the economy improves, interest rates will continue to grind higher, and we should expect fixed income (bonds) to continue to underperform for a period of time. This is normal in a rising rate environment, and we have adjusted our bond allocations in effort to lower duration risk or a bond’s sensitivity to rising rates.

In closing, (as I mentioned in September’s note), given the gains our portfolios have experienced, if you foresee yourself needing a substantial withdrawal over the next 2-4 months, we encourage you to reach out to us to discuss. Harvesting gains now for an upcoming future expense remains prudent.

We wish you and your family a great Friday evening, and a wonderful weekend!


As always, please reach out to us with any questions or comments you may have regarding your specific situation.

Jaran C. Day, Chief Investment Officer

Griffin Dalrymple, CFP®, Chief Strategy Officer