INSIGHTS FROM FIRST FOUNDATION

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The Week Ahead – Another Report Card & the Wall of Worries

Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.

This week we’ll close out the third quarter of 2021. With just four days left in the quarter, the S&P 500 will be looking to see if it can keep its streak of consecutive months with positive returns which currently sits at seven. As always, it’s been a whirlwind of macro and fundamental data and the Wall of Worries seems to be ever growing. Let’s take a quick look back at the headlines which popped up through the third quarter.

Third Quarter Wall of Worries:

  • The Delta Variant
  • Supply Chain Disruption
  • Inflation
  • Fed Taper Tantrum
  • China Regulation / Economic Slowdown
  • China Real Estate / Credit Crisis  
  • Record High Equities
  • Equity valuations
  • Potential tax policy changes
  • Debt Ceiling / Fiscal Cliff

WA image 9.27.21

Even through these Walls of Worries, the S&P 500 has marked 54 new record highs in 2021 through last Friday. When comparing data even from last quarter the fundamental data shows that investors have priced in more volatility for the future (higher VIX). Unemployment has recovered much faster than expected, dropping from 5.9% at the end of June to the current levels of 5.2%. The 10-year U.S. Treasury has been on a wild ride through the entire quarter, getting as low as 1.19%. To the surprise of many, S&P 500 equity valuations actually look better than the previous quarter as company earnings have outpaced expectations once again and multiples contracting during the quarter. As always, a report card is backward looking and we will be looking to see if results matched our expectations. More importantly, we’ll continue to look forward at the coming data to see if our base case scenario changes.

Data deck for September 27–October 1:

Date

Indicator

Period

September 27

Durable Goods Orders

August

September 28

Wholesale Inventories

August

September 28

Advance Goods Trade Balance

August

September 28

Case-Shiller Home Price Index

July

September 28

Consumer Confidence

September

September 29

Pending Home Sales

August

September 30

Initial Jobless Claims

----

September 30

2Q GDP (third estimate)

2Q 2021

September 30

Chicago Purchasing Managers

September

October 1

Personal Income Reports (PCE)

August

October 1

University of Michigan Sentiment

September

October 1

Construction Spending

August

October 1

ISM Manufacturing

September

October 1

Total Vehicle Sales

September

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Andrew Chan, CAIA, Co-Chief Investment Officer
About the Author
Andrew Chan, CAIA, Co-Chief Investment Officer
Mr. Chan co-leads the strategic investment committee and is responsible for overseeing First Foundation Advisor’s investment solutions platform which includes conducting investment manager research for both traditional and alternative investments as well as asset allocation guidance for portfolio construction. As a member of the investment committee, he provides market commentary and investment insights to clients. Additionally, Mr. Chan serves as a senior executive on the business strategy committee providing guidance on firm wide initiatives. With over 15 years of wealth management experience, Mr. Chan has played key roles across various aspects of investment and wealth management. Prior to joining First Foundation Advisors, Mr. Chan was most recently a portfolio manager at U.S. Trust where, in addition to his daily responsibilities, he served on numerous national committees including the investment manager committee, the portfolio model committee, and the strategic technology committee. He also served on the in-house strategic consultant committee reporting directly to the President of U.S. Trust. Mr. Chan is a graduate of the Wharton School Executive Program on Investment Management and holds a Bachelor of Arts degree in Business Administration from the University of California, Riverside. He is a Chartered Alternative Investment Analyst (CAIA). Mr. Chan has previously served as an exam working group member and as an exam grader for CAIA. A member of the CAIA SoCal Executive Board since 2015, Mr. Chan has served as executive chapter head since 2017. Read more