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Oct 13, 2021

Market Highlights 3Q 2021

Christina Siegel Malbon

The market was mixed during the quarter as the economy continued to struggle with the Delta variant. At one point, hospitals throughout the US hit crisis levels in I.C.U. capacity and we saw elevated rates of infection in areas with lower vaccination rates. By the end of the quarter, only 56% of the US population had been fully vaccinated with vaccination mandates starting to be announced by employers including the Federal government. The last US military planes left Afghanistan at the end of August, marking the end to a chaotic exit from the United States’ longest war. China continued to pressure stocks as it expanded its focus on regulation. There were multiple headlines throughout the quarter pressuring shares in Chinese stocks ranging from a focus on guaranteeing gig-worker benefits, to limiting the time minors can spend playing games, to an overhaul of the education tech sector banning companies that teach school curriculum from making profits, to raising cash or going public, and to draft rules on unfair competition on the internet. Multiple companies made pledges to donate money towards “common prosperity” including Pinduoduo, Tencent and Alibaba. The situation intensified as China Evergrande Group’s debt crisis was brought to the fore and markets wondered if we were witnessing another “Lehman moment.” Elections happened around the world with Germany’s Social Democrats gaining the majority of votes at 25.7%, but still needing to form a coalition. The Federal Reserve held interest rates steady at near-zero while also deciding to hold off on the tapering of bond purchases. Powell noted that tapering “may soon be warranted” but did not set a timeline. The new dot-plot shows expectations for a first rate hike in 2022 from 2023 in the previous release.

The S&P500 rose 0.58% beating both the Nasdaq Composite’s decline of 0.22% and the Dow Jones Industrial Average’s loss of 1.46%. Seven out of the eleven sectors posted positive returns during the period with Financials, Utilities, Telecommunication and Health Care posting the largest increases with returns of 2.74%, 1.78%, 1.60% and 1.43%, respectively. Large-cap stocks continued to outperform mid-cap stocks, which beat small-cap names. Specifically, the Russell 1000 Index rose 0.21% compared to the Russell Mid-Cap Index, which lost 0.93%, and the Russell 2000 Index, which declined 4.36% for the quarter. Growth stocks beat their value counterparts, as the Russell 1000 Growth Index gained 1.16% compared to the decline of 0.78% of the Russell 1000 Value Index over the same period. Bond returns were positive over the period with the long-dated US Treasuries returning 0.47% beating US corporates with the Barclays Aggregate returning 0.05%. The US Dollar Index gained 1.94% for the quarter while gold declined 1.06% and oil gained 2.12%. Bitcoin rebounded gaining 25.6% during the period.

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Bill Miller's 3Q 2021 Market Letter

Infographic: 3Q21 Market Data

The views expressed in this commentary reflect those of Miller Value Partners analyst(s) as of the date of the commentary. Any views are subject to change at any time based on market or other conditions, and Miller Value Partners disclaims any responsibility to update such views. The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. Past performance is no guarantee of future results.

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