September 28, 2021 Commentary

Good afternoon,

This tumultuous week of trading has been relatively self-inflicted.  While the debt ceiling issue may be the most time-sensitive and immediately consequential, it has become lost in the mix of political squabbles, new spending bills, reconciliation and the 60-vote thresholds.  During each of the times within the last two decades where the debt ceiling issue has created a risky situation for the United States, the Treasury Department has never missed a debt or interest payment. This time will be no different, as no politicians or parties want to have their names attached to the long-term consequences of a default.  However, as the Republicans leverage the debt ceiling as part of the $3.5 trillion reconciliation bill in order to negotiate size and substance, the market may remain in flux as well.

When we look beyond the debt ceiling issue, we return our focus to corporate earnings.  Of late, analyst estimates for quarter 3 have begun to decline, causing investor sentiment to wobble.  However, these earnings per share adjustments may be less a core threat to stock prices and more indicative of the near-term issues around the worldwide COVID outbreaks that continue to disrupt shipments, spending and the overall recovery.  That being the case, we believe that the outperformance of actual results relative to estimates over the last few quarters creates ample opportunity to exceed expectations and restore market confidence.

We remain optimistic that the economic expansion will continue and stock prices will return to their upward trend once the budget crises is resolved.

Past performance is not indicative of future results.  Risk is inherent in any investment.

Close Menu
Translate ยป