Market Outlook & ETF Ideas For The Fourth Quarter

Image: Shutterstock

  • (1:00) - Breaking Down The Recent Stock Market Price Action
  • (6:30) - Q4 Expectations: Should You Be Buying The Dips?
  • (10:00) - How Could The Fed Tapering Impact The Stock Market?
  • (15:10) - Will Small-Cap Stocks Outperform Going Forward?
  • (20:35) - Finding Trends With ETF Fund Flows

In this episode of ETF Spotlight, I speak with Matthew Bartolini, Head of SPDR Americas Research at State Street Global Advisors. We discuss the market outlook and best strategies for the fourth quarter of 2021.

September has been a tumultuous month for stocks. On Monday, the S&P 500 and the Nasdaq suffered their worst one-day declines since May on concerns surrounding the Chinese property developer Evergrande. Stocks are rebounding strongly today as those fears appear to have ebbed.

This comes after a record-breaking bull run for US stocks earlier this year. We may continue to encounter turbulence in the coming weeks on rising concerns about slowing economic growth, the Delta variant, and the possibility that the Fed may start tapering its asset purchases soon. What can investors expect from the fourth quarter of 2021?

Despite a record rally, stocks still look attractive compared to bonds thanks mainly to ultra-accommodative monetary policy.  While some investors are concerned about stretched valuations, the rally this year has been driven primarily by excellent earnings growth and most valuation metrics remain close to their levels at the beginning of the year.

As growth is expected to slow down in 2022, investors have started favoring stocks with more quality balance sheets and less volatile earnings, over the past few weeks. Matt likes strategies focused on dividend-paying stocks with a strong value bias. These can also provide diversification benefits to portfolios that have a lot of exposure to mega-cap tech stocks like Apple (AAPL Quick Quote AAPL - Free Report) and Microsoft (MSFT Quick Quote MSFT - Free Report).

The SPDR S&P Dividend ETF (SDY Quick Quote SDY - Free Report) holds companies that have consistently increased their dividend for at least 20 consecutive years. Exxon Mobil (XOM Quick Quote XOM - Free Report), AT&T (T Quick Quote T - Free Report), and Chevron Corporation (CVX Quick Quote CVX - Free Report) are its top holdings.\

In 2013, small caps had significantly outperformed other major asset classes from the initial taper “tantrum” to the actual taper. State Street expects small caps to deliver strong performance again as taper suggests confidence in the economy.  Further, earnings growth estimates for small caps have not come down as much as those for large caps.

The SPDR Portfolio S&P 600 Small-Cap ETF (SPSM Quick Quote SPSM - Free Report) provides access to more than 600 small-cap stocks selected by the S&P Index Committee. It has an expense ratio of just 0.05%. GameStop (GME Quick Quote GME - Free Report) and Macy’s (M Quick Quote M - Free Report) are among its top holdings.

US-listed ETFs have drawn monstrous inflows this year as investors love their low cost, tax efficiency, and transparency. We discuss recent fund flow trends.

Disclaimer: Neither Zacks Investment Research, Inc. nor its Information Providers can guarantee the accuracy, completeness, timeliness, or correct sequencing of any of the Information on the Web ...

How did you like this article? Let us know so we can better customize your reading experience.


Leave a comment to automatically be entered into our contest to win a free Echo Show.