Week in Review: October 22, 2021

Markets ended the week higher despite ongoing concerns about supply chains and attendant inflation. After falling just over 5% during September, the S&P 500 managed to set a new record high on Thursday. Further progress and increased clarity into President Biden’s proposed spending bill likely had a positive impact on the markets. While the specifics of the bill continue to be debated, the overall size has shrunk considerably from $3.5T to $2.0T. And in an effort to ensure the necessary 50 votes for passage, certain aspects of the bill appear to have been removed, including increased corporate taxes.

Speaking at a panel discussion on Friday, Federal Reserve Chair Jerome Powell indicated that the Fed is “on track’ with respect to its tapering plans. Most economists expect the Fed to officially announce its tapering plans at its next meeting in early November. On the topic of supply chains and inflation, Powell stated that, “The risks are clearly now to longer and more persistent bottlenecks, and thus to higher inflation.” Powell did note, however, that the Fed was prepared to act should inflation move persistently higher.

Through Friday, 23% of S&P 500 companies had reported 3Q21 earnings. Thus far, 84% of companies have exceeded their consensus earnings estimate, while 75% have surpassed their revenue estimate. According to industry group FactSet, aggregate S&P 500 earnings are expected to increase 33%, up from 28% at the start of earnings season.