November 2021 Newsletter
November, 2021
Earnings Drive Market
Last week kicked off with the Dow Jones Industrials and S&P 500 index setting record highs as the financial markets carried over the previous week’s price momentum.1
Stocks continued to climb on a string of forecast-beating earnings results. With about half of the S&P 500 constituent companies having reported earnings, more than 80% of them have beaten Wall Street analysts’ consensus estimates. Based on these results, earnings for all S&P 500 companies are expected to come in approximately 39% above the third quarter of last year. (Forecasts are based on assumptions, and may not materialize.) Stocks overcame disappointing earnings from two mega-cap tech names on Friday to maintain the week’s solid gains.2
GDP Growth Slows
While businesses managed to post strong earnings in the third quarter, the first look at economic growth came in below consensus estimates. The Gross Domestic Product (GDP) grew at a 2.0% annualized rate in the third quarter, a slowdown from the two previous quarters, each of which posted annualized growth rates in excess of 6%.3
The spread of the Delta variant and backlogs in the supply chain were two major factors dragging on economic activity.
October Market Highlights
September’s -4.7% return snaps a 7-month “winning” streak for U.S. stocks, which was followed up by a strong October rebound. Since 1990, the average “winning” streak has lasted 7 months, and on average returned 12.1% over the next 12 months. September’s 3.0% 10-year rolling return for core bonds has them poised to drop below 3.0% for the first time since April 1968. 23% of all 10-year return period for bonds have been below 3.0%.
Alternative & Commodities funds have collectively seen inflows of $23.8B YTD, as of 8/31/21. This is on pace to be the largest year of inflows ever since 2001, surpassing 2010 (full year) with $29.8B. Possibly the push into alternative & commodities has been driven by investors fear of inflation.
Pent-Up Demand & Unprecedented Savings
Whilst investors are concerned about inflation and rising bond rates, pent-up consumer demand and astronomical savings levels potentially bode well for the economy in the near term.
Inflation Breakdown
You've been hearing about inflation all year, but what exactly constitutes headline inflation? This visual is a nice breakdown of the components of inflation.
Don’t Be Your Own Worst Enemy
One of the most well-known investors of the 20th Century, Benjamin Graham, said that “the investor’s chief problem—and even his worst enemy—is likely to be himself.”4
What Graham understood—and modern research is catching up to—is the idea that we all have emotions and biases that affect our decision-making. The innate wiring built to survive pre-modern times can be counterproductive in our modern world, especially when it comes to investing.
Let’s take a quick look at a few of the human emotions and biases that can adversely impact sound investment decision-making.
Fear and Greed
These are the two most powerful emotions that move investors and investment markets. Each emotion clouds our capability for rational and dispassionate decision-making. They are the emotions that lead us to believe that prices may continue to rise (think the Tulip price bubble of 1636) or that everything has gone so wrong that prices may not recover (think Credit Crisis of 2008-2009).
Some investors have found a way to conquer these emotions, be brave when everyone else is fearful, and resist the temptations of a too-exuberant market.
Overconfidence
Peter Bernstein, a noted economic historian, argued that the riskiest moment may be when we feel that we are right.5 It is at that precise moment that we tend to disregard all information that may conflict with our beliefs, setting ourselves up for investment surprise.
Selective Memory
Human nature is such that we tend to recast history in the manner that emphasizes our successes and downplays our failures. As a result, we may not benefit from the valuable lessons failure can teach. Indeed, failure may be your most valuable asset.
Prediction Fallacy
Humans have an innate desire to recognize patterns and apply these patterns to predicting the future. We erroneously believe that because “A” occurred and “B” happened that if “A” happens again, we can profit by anticipating that “B” will repeat. Market history is littered with examples of “rules of thumb” that have worked, until they no longer worked.
Financial markets are complex and unpredictable. Our endeavors to tap their opportunities to pursue our financial goals are best realized when we don’t burden the enterprise by blindness to the inherent behavioral obstacles we all share.
Maximize Your Charitable Impact on Give to the Max Day
This November as we prepare to celebrate and reflect on all that we are grateful for, don't forget to mark your calendars for the Thursday before Thanksgiving - Give to the Max Day!
Since its inception in 2009, Give to the Max Day has become Minnesota's most impactful single day of giving each year, responsible for raising $275 million for nonprofits throughout the state. In 2020 alone, despite all the ways the COVID-19 pandemic impacted families, Minnesota set a new record on this annual giving holiday of $30.4 million.6
Organized by GiveMN, a nonprofit that helps connect donors with Minnesota organizations, the event makes giving super easy, and offers plenty of opportunities to make your donations go further to support the causes of your choice.7 If you have been feeling inspired to make a year-end donation to an organization that positively impacts your community, November 18th might be the day to get the most bang for your charitable buck(s).
Wondering where to start? GiveMN.org is the home base for all things related to Give to the Max Day - here's how they make it easy and fun for everyone to get involved:
• If you've shopped online, you can give online.
Minimum donations are $10, and all that is needed is a credit card. Whether you'd like to "give big" to one organization near and dear to your heart or support several causes you care about, the website has a shopping cart feature so you only have to check out once.7
• Find exactly where you want your dollars to go.
There is an incredibly user-friendly search engine where you can filter down from 34,079 registered nonprofits, schools, and churches to what you are most interested in. You can choose by category like Arts & Culture or Education, select based on location, search specifically for organizations whose donations will be matched to make your dollars go further, and more.6
• There are PRIZES!
In addition to donations made by individuals, the Bush Foundation provides $100,000 towards randomly drawn "Golden Tickets" that can supplement your giving with an extra prize grant worth anywhere from $500-$10,000 to the organization you support. Every donation, no matter what the size, is eligible to win these additional grants.6
• You actually have 18 days to give.
While technically Give to the Max Day is Thursday, November 18th, Early Giving starts November 1st and runs 24 hours a day. All donations made through the 18th will be counted towards this giving holiday grand total.6
Beyond Gratitude and Transparency, we here at GTS Financial value Service- we aim to serve not only our clients but our employees, their families, and our community. We want to be a force for good in the world and hope you'll join us in that effort on November 18th.
Daylight Savings: How to "Fall Back" Better
The end of Daylight Savings Time is coming up on November 7th, which means we all will be 'gaining' an extra hour of sleep this weekend. For a lot of us, however, that one hour transition for our internal clocks doesn't happen automatically overnight like it does on our cell phones.
Studies show that disruptions to our regular sleep schedule can throw off hormonal balances, exacerbate mental health challenges like depression and anxiety8, and there is even a recorded spike in auto accidents the week following fall daylight savings adjustments!9
To help keep you safe and sleeping soundly, we've collected a few tips to help you and your family "fall back" a little more gracefully this weekend.
1. Prepare in Advance -
If you find it hard to stay up at night, try to prolong bedtime by a few minutes more each night leading into the weekend. This will not only make it easier to carry on with your usual schedule after Daylight Savings Time ends, it will also hopefully help you stay asleep longer in the mornings. While many parents can't wait to put their kids down for the night, keeping them up a little bit later this week might help you stay in bed a little later next week if you start making the adjustment now.
2. Change your Clocks in the Morning -
For any clocks you still need to adjust manually, wait to reset them on Sunday morning. If you are usually a 6am riser, go ahead and wake up when your body says it is time and start your day- as you get up and turn all those clocks back, it will feel more like you're gaining an hour of your Sunday morning to savor that sunrise and a cup of coffee rather than telling yourself that you're waking up too darn early at 5am.
3. Gradually Adjust Bedtimes -
Following the 'Fall Back', experts recommend making incremental adjustments to yours, and especially young kid's, bedtime. If your kiddo usually goes to bed at 7pm, try putting them in bed at 6:30pm (which will feel like 7:30 to them), and then work you ways towards 7pm again over the week. Don't forget to do the same for yourself!
4. Substances, Screen Time, and Sunlight, oh my!
Try to be intentional about your timing when it comes to your intake of caffeine and alcohol, and your exposure to sunlight and screen time. These are all well-known sleep disruptors when absorbed right before bedtime.10 Similarly, raising your core body temperature can make it harder to fall asleep, so try to finish any heavier workouts at least 4 hours before you got to bed.8 On the other hand, a cup of coffee in the morning and a sunny mid-afternoon walk can be great ways to jumpstart your body into following a new routine.
Daylight Savings Time or not, it is always recommended for adults to get 7+ hours of sleep per night, and aim to go to bed and wake up at the same time each day for the best quality sleep and long term health benefits. Variety is the spice of life, except when it comes to your Zzz's.
Grow Your Gratitude Muscles
One of my favorite parts of Thanksgiving is when we go around the table and all share something we are thankful for. My heart always swells with recognition of how truly blessed I am to be in a warm home, eating an abundant meal, with people I love. It is a tradition we do every year for the holiday, but if it is that meaningful, why aren't we taking time every day to show thanks and remember what we are grateful for?
Study after study has demonstrated the vast, long term, mental and physical health benefits enjoyed by those who practice gratitude regularly - it reduces stress, anxiety, depression, and chronic pain, while boosting happiness, self-esteem, your immune system, relationships, and sleep…just to name a few.11
Any coach or physical trainer would tell you that your activity of choice will only become easier the more you do it. The same can be said about gratitude. Expressing thankfulness helps train your brain to be that much more sensitive to the experience of gratitude - it's a positivity snowball that is (happily) hard to stop once it starts gaining momentum.12
In honor of Thanksgiving just around the corner, this November we want to help you flex your gratitude muscles so that you can be at your peak gratitude fitness. Here is your GTS Financial GTP (Gratitude Training Plan)-
WEEK ONE: Engage your senses. At the beginning of the week, open your GTS gratitude journals and write down the prompt below with three lines open between each of the five senses that you can fill in throughout the week.13
I'm grateful for these three things I…
Hear-
See-
Smell-
Taste-
Touch/Feel-
WEEK TWO: Give thanks. Write a gratitude letter or thank you note to three people you appreciate this week.
Interestingly, research has demonstrated that we experience mental health gains through the exercise of writing these notes of thanks whether or not we even send them12, but why not let those people know you are grateful for them?
WEEK THREE: Use your imagination. Take a moment to consider what life would be like if you didn't have that thing or person you are grateful for, and then journal about why they matter to you. You'll likely find through the process of imagining life without, your writing about why you appreciate that person or thing will be all the more detailed and vivid in your mind and your gratitude barometer has been boosted.13
WEEK FOUR: Flip the switch. Anytime you notice yourself thinking a negative thought, try to catch yourself in the moment and turn your focus towards at least one thing you are grateful for right then and there.14
A great exercise to use for this one is to change every "I HAVE to" into an "I GET to". Even a simple shift in one word you say or think can change the whole tone. Rather than "I have to get up early to go to the gym tomorrow", why not say "I get to take time for myself to do something that will make me feel good for the rest of the day."?
These shifts in mindset do not happen overnight, but some research says after just 4 weeks of gratitude training participants are already experiencing positive mental health benefits that will only continue to accrue from there.12 Consider these 4 weeks of guided gratitude exercises as your "boot camp" for a better life.
“The heart that gives thanks is a happy one, for we cannot feel thankful and unhappy at the same time.”
-Douglas Wood