October 4, 2021

Contributors: Andrew Walker, Bruce Ensrud, Matt Stockman 

Encouragement: Keep Perspective

Despite the unprecedented global COVID-19 pandemic and all of the ripple effects that it has caused, investment markets across the world have been relatively benign ever since last April/May thanks to the unprecedented stimulus introduced by governments and central banks around the world. In fact, aside from a few smaller bouts of volatility such as those related to the 2020 U.S. presidential election last fall, markets have largely trended higher.

A recent 5% pullback in markets has market participants more worried than we have seen them all year, given the significant amount of background noise related to China, debt ceilings, tax law changes, COVID variants, and expectations of waning stimulus.

As always, a small dose of perspective is incredibly helpful in effectively assessing how the current landscape should affect decision making.

  1. First, it is important to observe that, despite the alarming news cycles we have seen recently, the S&P 500 has only experienced about a 5% pullback. This coming after a year that has conditioned us to expect nothing but more record-highs!
  2. Second, it is prudent to remind ourselves that an average year sees three different 5% drops in the S&P 500. Until September, we hadn’t seen any!

In our portfolios, we see the recent volatility as a manifestation of many uncertainties looming on the horizon. As these uncertainties become certainties (What will the new tax law be? Will the debt ceiling be lifted? Will the federal reserve raise interest rates?), we expect market volatility to wane. Although we expect volatility to wane and markets to finish the year on a positive note, we see the recent 5% pullback as very nominal, and not necessarily an opportunity to radically change portfolio positioning.

Thank you for allowing us to partner with you as we navigate the ever-changing market. We appreciate your continued trust. If you have questions or would like to dive deeper into this quarter’s outlook, please reach out to our investment team. We’d be happy to set up a virtual coffee to talk more.

Parable Wealth


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