Economic Review: November 2021

Economic Review: November 2021


The short-term interest rate remains near zero as the Fed continues its accommodation policy and steadily monitoring data for signs of persistent broad-based inflation. Inflation has been a concern for the past months. The Consumer Price Index rose 0.4 percent in September or 5.4 % over the past 12 months (

Some market participants have expressed concern over a possible stagflation scenario. It is unlikely, we will experience high unemployment and high inflation. According to the Department of Labor, unemployment fell to 4.8% in September (

While the ten-year Treasury yield increased about ~10 bps to ~1.6% from last month, it still compares relatively low to a dividend yield of 1.4% for the S&P 500 index. A relatively high broad equity market valuation, driven by the top ten largest companies, lowered the dividend yield well below the historical average.

The top ten most significant S&P 500 index constituents, including AAPL, MSFT, AMZN, FB, and GOOG, continued driving the equity market valuation relatively pricey, evidenced with a P/E ratio of ~32.2x compared to the current index average of ~21.4x.

More than half the broad market companies have reported third-quarter earnings. The majority have exceeded earnings and revenues expectations. Earning growth, supported by margin improvements and higher revenue, is driving the valuation of the S&P 500 index.

Our economy continued to grow during the third quarter, with a GDP higher than pre-COVID. However, the pace slowed down to an annualized 2%, which was below the market forecast. The headwind could be attributed to the Delta variant, supply chains shortage, and reduced personal consumptions.

Source: BlackRock Advisor Center/ American Funds/ Federated Hermes/ Federal Reserve Bank of Atlanta/J.P. Morgan Asset
Management. Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents, under their 
individual assumptions of projected appropriate monetary policy, October 30, 2021.  
This commentary contains forward-looking statements which indicate future possibilities. There is no guarantee views 
and opinions expressed herein will come to pass.


Patrick Baumann, CFA® Chief Investment Officer

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