The Numbers & “Heat Map”

THE NUMBERS
Sources: Index Returns: Morningstar Workstation. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. Three, five and ten year returns are annualized. Interest Rates: Federal Reserve, Mortgage Bankers Association.

MARKET HEAT MAP
The health of the economy is a key driver of long-term returns in the stock market. Below, we assess the key economic conditions that we believe are of particular importance to investors.

US ECONOMY

CONSUMER HEALTH

POSITIVE

September retail sales surprised to the upside, increasing 0.7% month-over-month (m/m) and 13.9% year-over-year (y/y). Economists expected September’s retail sales to decline slightly m/m.

CORPORATE EARNINGS

POSITIVE

With 23% of S&P 500 companies having reported Q3 results, sales and earnings are up 15% and 32%, respectively. However, company commentary suggests that the supply chain will be problematic in the coming quarters.

EMPLOYMENT

POSITIVE

The unemployment rate is down to 4.8%, as of September. The labor market is very tight at present, as many employers, particularly in the Leisure and Logistics sectors, are struggling to fully staff. The labor shortage is one of the causes of the global supply chain glut.

INFLATION

NEUTRAL

CPI rose 5.4% year-over-year in September, driven by the global supply chain backlog.

FISCAL POLICY

POSITIVE

A bill to lift the U.S. debt ceiling by $480 billion – which should provide enough headroom for government operations until December 3 – was passed.

MONETARY POLICY

POSITIVE

In recent communications, the Fed has indicated bond tapering may begin by the end of 2021 while rate hikes could commence by the end of 2022. Nonetheless, monetary policy remains relatively accommodative with rates at historical lows.

GLOBAL CONSIDERATIONS

GEOPOLITICAL RISKS

NEUTRAL

Although the Taliban’s control in Afghanistan is concerning, it is unlikely to have a meaningful economic impact.

ECONOMIC RISKS

NEUTRAL

Supply chain disruptions are hampering the economy; however, demand remains very strong. The hold-ups appear primarily transitory and should ease progressively over time.

The “Heat Map” is a subjective analysis based upon metrics that VNFA’s investment committee believes are important to financial markets and the economy. The “Heat Map” is designed for informational purposes only and is not intended for use as a basis for investment decisions.

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