In Q3 2021, US and European stocks rallied during July and August, but gave back these returns in September and ended the quarter flat. Emerging market stocks saw more volatility (-8.1%) as increased regulatory pressure from the Chinese government hurt major sectors across China/Hong Kong. The price of the 10-year Treasury bond also varied considerably during the quarter, only to end where it began as investors sought safety from rising COVID-19 infections and inflation fears, ending at 1.49%.
Delta Variant, Rising Inflation, Fading Stimulus and Supply Chain Bottlenecks
Throughout much of 2021, the pace of the US economic recovery accelerated as earnings growth (not valuation expansion) rose and was the primary factor for the 16% rise in the S&P through the end of the quarter. However, in September, profit estimates declined for the first time in 15 months.
Continue reading to learn about how the Delta variant, rising inflation, and fading stimulus contributed to an acceleration in the pace of the US economic recovery.
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