While our Composite’s absolute performance has advanced notably since the darkest days of 2020 and is solidly higher on a year-to-date basis, we have been going through a correction of late. This correction has been broader and deeper under the surface than a quick glance at major indices would suggest.
We have also experienced a pullback with our Composite off 5.6% from its peak this year and the average stock currently in the portfolio down 10.8% from 52-week highs.
There is a long list of possible ingredients for this retreat (China Evergrande, growing supply chain issues, higher than expected transitory inflation, a bump up in long bond rates, a nasty budget battle, and fiscal stimulus fights to name some of the specials). But I would pick the likely end of super-cheap money as the main course, with rising energy costs and stretched valuations for the growthiest of names as side dishes.
To read more, download the full Third Quarter 2021 Investment Perspective.