Market insights and analysis

How dynamic, risk-managed investment solutions are performing in the current market environment

2nd Quarter | 2022

Market insights and analysis


Updates on how dynamic, risk-managed investment solutions are performing in the current market environment.

By David Wismer

With Thanksgiving fast approaching, on behalf of Flexible Plan Investments (FPI), I would like to thank the many people who have worked with our company this year: our investor clients, financial advisers, our third-party partners throughout the investment industry and elsewhere, and members and businesses of our local community.

And, of course, thanks to the FPI employees who work so hard each day on behalf of our company and its clients.

Despite its challenges, 2021 has been a very productive year for FPI. We have continued to focus on providing excellence in our product and service offerings.

This would not be possible without the support of those mentioned above. Thank you.

Thanksgiving literally reminds us each year of the importance of self-reflection and expressing gratitude for our blessings and the positive impact others have made in our lives.

Roman statesman, scholar, and philosopher Marcus Tullius Cicero is credited with the expression, “Gratitude is not only the greatest of virtues, but the parent of all the others.”

On a related (if less lofty) note, country icon Willie Nelson is cited as saying, “When I started counting my blessings, my whole life turned around.”

Consumer sentiment vs. market performance

As U.S. equity markets continue to navigate what is typically the most positive consecutive three-month period of the year (November–January, according to Yardeni Research data going back to 1928), the current mood of American consumers conflicts a bit with the records being posted by major indexes.

Bespoke Investment Group says that last week saw the 66th record closing high for the S&P 500, putting 2021 in second place (so far) for that measure on a historical basis.

However, the University of Michigan Consumer Sentiment Index fell to 66.8 for November, according to data released Friday, November 12.

According to CNBC, “That was the lowest since November 2011 and well below the Dow Jones estimate of 72.5. October’s reading was 71.7, meaning that the November level represented a 6.8% drop.”

The University of Michigan Surveys of Consumers chief economist Richard Curtin said the following about the survey results:

“Consumer sentiment fell in early November to its lowest level in a decade due to an escalating inflation rate and the growing belief among consumers that no effective policies have yet been developed to reduce the damage from surging inflation. One-in-four consumers cited inflationary reductions in their living standards in November. …”

Despite those overall sentiment findings, Bespoke notes that investor attitudes are quite positive:

“After dropping to its lowest post-Covid levels in early October, we’ve seen an across the board increase in bullish [investor] sentiment to the point where net bullish sentiment currently sits at 57.1%. This week’s composite sentiment reading dipped a bit due to the drop in bullish sentiment in AAII’s survey, but even at current levels ranks in the 87th percentile of readings over the last 15 years.”

Beyond the continued easy monetary policy of the Federal Reserve, which did recently announce a tapering of bond purchases, corporate earnings have been a major driver behind the equity markets’ strong 2021 performance.

Data and analytics provider FactSet notes the positive metrics of the current earnings season:

“For Q3 2021 (with 95% of S&P 500 companies reporting actual results), 82% of S&P 500 companies have reported a positive EPS [earnings per share] surprise and 75% of S&P 500 companies have reported a positive revenue surprise. …

“The blended earnings growth rate for the S&P 500 is 39.6%. If 39.6% is the actual growth rate for the quarter, it will mark the third-highest (year-over-year) earnings growth rate reported by the index since 2010.”

The following chart tracks the upward trajectory of both earnings and the S&P 500 price trend. There is some variance between price and EPS, reflecting a forward 12-month price-earnings ratio for the S&P 500 of 21.4, well above the five-year average (18.4) and the 10-year average (16.5).

Bespoke Investment Group cites several potential reasons for investor concern going into year-end: the impact of inflation, COVID’s “comeback” in Europe and several areas in the U.S., some weakening of overall market breadth (especially among small-cap stocks), uncertainty about the path of monetary policy in 2022, and the well-publicized issues surrounding shipping and supply chains.

However, Bespoke notes plenty of positives among recent economic data, concluding, “Seasonally speaking, Thanksgiving week is a positive one for equities, and December is one of the best months of the year. While there are plenty of concerns (when are there not?), there’s a lot to be thankful for too!”

Two FPI “news items”

I want to close out this Thanksgiving-week article by mentioning two recent pieces of news concerning FPI that we are particularly proud of:

• Flexible Plan Investments has been recognized as one of Michigan’s top workplaces of 2021. FPI ranked #53 on the 2021 Detroit Free Press Top Workplace list in the small business category. Only 174 companies earned a place on this year’s Top Workplaces list. This is FPI’s fourth time on the list, with previous awards in 2011, 2012, and 2013. The award reflects employee feedback on 15 cultural drivers that are critical to the success of any organization, including leadership, communication, career opportunities, and working environment.

• FPI has been named a 2021 ThinkAdvisor LUMINARY. The company has been recognized in the category of Executive Leadership for the $40,000 charitable donation match program celebrating FPI’s 40th anniversary. FPI invited valued clients, adviser partners, and staff to join in the celebration, and the final tally was over $80,000 raised for more than 70 charities across the country. Many thanks to all who participated in this worthy effort!

Congratulations—and thanks—to the entire FPI family for their integral roles in both of these achievements.

Best wishes to everyone for a safe and enjoyable Thanksgiving holiday.

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