A Repeat in History?

This month could be a September to remember. Congress is about to begin a debate on the largest tax increase in 50 years as well as the largest spending package since the great depression. These topics are in addition to, the debt ceiling, the Fed tapering talk, the fiscal drag, and even the possibility of a government shutdown. So, the market has a lot of fiscal policy noise to manage coming out of DC in the next few weeks. We looked back at the market performance of 2013 and the reason we did that is because there are a lot of similarities from then to now. In the video for this episode, you will see a chart showing 2013. This year looks pretty similar to that year, in terms of year-to-date performance through August. In 2013, we saw that volatility started to spike in September due to some of the same type of fiscal uncertainties that are expected to be raised this September. We point this out to show that even with the volatility spike in September, the market in 2013 finished higher than where it started in August. As always, no guarantees, but it could be a September to remember in terms of news coming out of Washington, DC. Just know that we have been here before and we’re staying committed to our investment strategies.

Weakness and Supply

An interesting survey came out of the Dallas Federal Reserve board about the supply chain’s impact on revenue. This is a survey you can see on the chart we show in the video for this episode that compares the survey results of July 2020 versus the survey results of August 2021. You can see back in July of 2020, the biggest concern for companies, in terms of their impact on revenue, was weakness and demand. The reverse is the case now. The number one concern is weakness and supply. They’re concerned that their revenue is being constrained and we’ve seen this in some earnings by the ability to provide enough goods and services to meet the increased demand. That’s likely one of the reasons that we’re seeing higher prices. If you have higher demand and you cannot produce the supply, then prices must go up. You can see on the next chart shown in the video, where we have some of the biggest and most important commodities in the world, you can see how a lot of them have come down off their COVID peaks, but they’re still well above where they were in the years 2016 to 2019. A lot of that’s likely driven by supply chain issues. You can see how lumber, which has had an impact on housing, is down 71% from its high, but it’s still up 27% from normal levels. The same thing goes for iron ore, copper, and oil where they’re down from their highs, but they’re still elevated. This is likely the cause of issues in the global supply chain. The US is much closer to normal than the rest of the world is. There’s still a lot of improvements that can go on, but these issues aren’t permanent. Once we get some normalization of the global supply chain, you’ll likely see these prices come down. The big question out there is when. Obviously, it’s unlikely to occur immediately, but it’s good to know that it’s not a permanent increase in prices or a permanent restriction of supply. This is something that we’re going to have to just work through going forward.

Technical Analysis

The last couple of few weeks we’ve really been focusing on the resistance level for the end of the year on the S&P 500. Today, we wanted to go over the intermediate support level, which coincides with the end of the year. That support level is sitting at a price of 4,360. What does that mean? If The S&P 500 were to fall under that mark in a consistent manner, that could become our floor number for the market. The 50-day moving average is sitting at 4,402 and the 100-day moving average is at 4,295. The end of the year price of 4,360 is really the mark we want to focus on because if we go below that mark, we might see some bears. This could also mean there may be some great buying opportunities.

 

Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here

Bobby Norman, CFP®, AIF®
Managing Director
Wealth Consultant
Email Bobby Norman here

Trey Booth, CFA®, AIF®
Senior Vice President
Wealth Consultant
Email Trey Booth here

Adam Vansant, AIF®
Associate Vice President
Wealth Consultant
Email Adam Vansant here

 

Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.

Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.

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