Taking a breather...

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19-Sep-2021 07:35:11
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Weekly Market Update - Taking a Breather

The S&P 500 has soared more than 35% in the last 12 months, and it looks like the bulls are taking a breather in September. 

The Nasdaq, S&P 500 and DOW were down marginally for the second week in a row. However, the small-cap Russell 2000 Index managed to stay in the green.

Also, the trading volumes were still substantial, with 3.3 billion shares changing hands on the NYSE and 6.4 billion shares on the Nasdaq.

Although still high, Core inflation eased to 4% from 4.5% in June, confirming Fed's stance that inflation is transitory. Markets see this as good news as it allows the monetary policy to remain accommodative for some more time.

The markets continue to seek direction amidst the Delta variant uncertainties, the timing of tapering and persisting supply chain challenges. 

Next week's Fed meeting outcome could give markets some direction, depending on its stance on the tapering and the monetary policy as we advance. 

Europe

Shares in Europe also continued to decline as the virus is still taking its toll. The EURO Stoxx Index was down by 0.97%.

  • Italy's FTSE MIB Index was up by a tiny margin
  • Germany's Xetra DAX was down by 0.77%
  • France's CAC 40 slipped 1.40%
  • UK's FTSE 100 was down by 0.93%

Japan

Japanese stocks continued to rise for the second week in a row as the presidential campaign began. Pre-election polls by Bloomberg indicate a victory for Taro Kono. More stimulus and the extension of the accommodative monetary policy is expected if he wins the election.

China

A fresh coronavirus outbreak in Fujian province sent the stocks prices tumbling in China. The CSI 300 index fell 3.1%, and the Shanghai Composite Index fell by 2.4% last week.

Evergrande Group - Too big to fail or too tough to save? China's second-largest property developer is stuck in a $301 billion debt crisis. The Chinese central bank has infused 14 Billion dollars in an attempt to save the company. It is still unsure if the company will make the payments due on 20th Sep 2021.

India

While markets in the west and China are struggling, Indian markets continue to rise for the fourth consecutive week. Market sentiments continue to improve in response to the support measures announced by the central government. 

Both Sensex and the Nifty scaled new heights to close at 59,015.89(up by 1.22%) and 17,585.15(+1.24%), respectively. The Midcap and the small-cap indices also were up by 1.38% and 1.31% last week.

Outlook

Despite the September blues, market fundamentals are still strong. The positive earnings outlook, growing economy, and low-interest rates will continue to fuel the bull run, but with increased volatility going forward.

What does this mean to you?

As stated last week, As a retail investor, it would be better to focus on your personal goals and investment horizon than the market sentiments. 

If you are investing for long term goals, stay invested in a diversified equity portfolio. And if your investment horizon is short, skew towards cash, gold and fixed income. 

Also, remember that bull market corrections are unpredictable and typically short-lived; hence, looking to time the markets may not be a good idea. Instead, focus on building a balanced portfolio diversified across sectors, geographies and asset classes. 

Including cash, bonds and gold can help mitigate volatility and be used for rebalancing and buy equities when markets correct. 

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