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Q3 2021: An “Up” Stock Market in September… Even With The Appearance Of An Inverted Yield Curve!

Updated: Sep 27, 2022

Last month, we used this valuable real estate to summarize the infamous inverted yield curve and the subsequent pending doom it projects. Well, apparently, that was yesterday’s news and the stock market participants have moved on and up for a matter of fact. The market (as measured by the S&P 500 Index) registered a 2%+ gain for the month of September. A nice little rally from the 1% drop experienced in August.

In all fairness, the appearance of an inverted yield curve does not mean we are headed for a recession the next week or even that the stock market is going to crater (at some point). A recession is typically months away or even a few years away (if at all) following the yield curve inversion. But, on the other hand, any financial professional knows this as well as the fine folks on the financial “news” stations.

So why the sensationalism of these potential market moving events? Well, we do live in a capitalist society and the more eyeballs on the screen, the more money media earns via advertising. And, believe it or not, negative, fear mongering, and or potentially money losing events garner much more viewership than programming focused on “rainbows and unicorns.”

Unfortunately, many people (investors) watch and react to this financial pornography that yes, in the short-term may cause a concern or two, but over the long-term they are merely a minor speed bump on our ascent to true long-term capital growth. No doubt, at some point the economy will slow down and yes, we may actually enter a recessionary period, but we have been through this before. Tell me if I am wrong, but life as we know it today seems pretty good.

For instance, going back 50 years… only 9% of households earned more than $100,000 annually (in today’s dollars). Fast forward to today and 29% of households are in this category. In other words, the number of households earning $100,000 a year has tripled! The same astounding positive improvements in our standard of living has impacted the lower income earners as well (i.e, many have been elevated to middle class). By the way, this all occurred during a half century where we saw seven recessions!

These statistics came from an article from Mark W. Perry, “America’s middle class is disappearing…but it’s because they’re moving up.” Even in a discussion of what has happened to the middle class, people immediately assume there is a negative reason for why it’s shrinking. Then again, with the news we are fed, who can blame folks for being negative.

As investors, we stay positive by keeping our focus on what’s depicted in the graphic to the right. The individual companies that are responsible for our standard of living dramatically rising over the years. Better known as Corporate America! As I mentioned, yes, we know we will experience recessions, but we also know over time these companies create value (i.e., make money) resulting in our investments increasing in value thus allowing us to prosper in this incredible world we are fortunate to be living.

Rest assured this cycle will continue to repeat itself over and over again. So, please do yourself a favor and watch the financial news stations purely for entertainment (as we do) or turn it off and go out for a walk! There are rainbows and unicorns waiting to be found somewhere out there!


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