That Was Short-Lived

Weekly Market Update | September 27, 2021

Highlights

Globally, stocks were little changed after a volatile week with the MSCI All Country World Index eking out a 0.1% gain. In the U.S., the S&P 500 rose 0.5% while the Dow Jones climbed 0.6%. Emerging markets underperformed as Chinese shares tumbled further. The 10-year U.S. Treasury yield jumped following the Fed’s September meeting - rising from 1.30% to 1.45%.

Concerns of possible financial contagion rose sharply early last week as China’s second-largest property developer appeared to be heading towards a default on its bonds. However, fears eased as the potential failure seemed somewhat contained and U.S. bank exposure seemed limited. Longer-term concerns about a potential slowing in China’s economy remain valid.

The Federal Reserve also moved markets by strongly signaling that a tapering of its monthly bond purchases could be announced as soon as their November 3 meeting. Although investors were concerned that the U.S. stock market might react negatively to such news, risk-sentiment seemed to improve as the uncertainty cleared. Interestingly, Fed Chair Powell stated that he does not need to see a blowout September employment report to feel like enough progress has been on the labor market front…simply a decent report. It seems like an official announcement by year-end is almost assured.