Throughout most of 2021, U.S. equities have climbed the proverbial “wall of worry,” ignoring increasing risks and instead fixating on strong economic and earnings news, propelling the S&P 500 to 49 record closing highs since the start of the year. The combination of U.S. GDP now above pre-pandemic levels and an impressive second-quarter earnings season that saw corporate profits jump over 90% from year-ago levels have helped the S&P 500 double its price level off of 2020 pandemic-lows and return over 17% this year. However, after hitting an impressive streak that saw this index close at a record-high for five consecutive sessions, U.S. equities have succumbed to investor worries. The S&P 500 has experienced a two-day sell-off that has seen the index drop nearly 2%, its worst two-day performance in almost a month, while the small-cap Russell 2000 has fallen for five straight sessions. As we have noted in numerous commentaries, we see three primary risks facing investors, and this past week saw clear evidence that financial markets are finally beginning to take notice.
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Commentaries are published by Cetera Investment Management LLC, an SEC registered adviser owned by Cetera Financial Group. Cetera Investment Management provides market perspectives, portfolio guidance, model management, and other investment advice to its affiliated broker-dealers, dually registered broker-dealers and registered investment advisers.
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