Week of September 27, 2021

The U.S. equity markets experienced more volatility last week than it has in several months.  Last Monday, September 20, The Dow plunged 614 points, coming one day before the Federal Reserve began its two-day policy meeting.  The Fed announced on Wednesday that was not going to raise interest rates now but may do so at least one time in 2022.  The fed also indicated that it would begin reducing the amount of bonds (U.S. Treasuries and mortgage-backed securities) it purchases each month, also known as “tapering,” as early as November.

These announcements sparked a powerful two-day rally totaling 884 points on the Dow making for a weekly gain of 0.6%.  The S&P 500 and the NASDAQ also recovered, gaining 0.5% and 0.02%, respectively.  Month to date, the S&P 500 is down 1.5% and on track to post its first monthly loss since January.  The Dow and NASDAQ had previously been over 2% away form its most recent record high closes.  The S&P 500 was 1.8% shy of its latest record close.

“We continue to exercise caution in the near term, especially as we enter the seasonally weakest part of the year (late September – mid-October),” said Larry Adam, CIO at Raymond James.  “However, given continued robust economic growth, our bias is to hold existing equity exposure or add opportunistically on weakness.”

Investors this week are set to closely watch for develops in Washington, D.C., as lawmakers race to pass legislation to avoid a government shutdown by the end of the month and debate raising the debt ceiling.  economic data on consumer confidence is also due for release.