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Market Outlook & ETF Ideas for the Fourth Quarter

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·3-min read
In this article:
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  • (1:00) - Breaking Down The Recent Stock Market Price Action

  • (6:30) - Q4 Expectations: Should You Be Buying The Dips?

  • (10:00) - How Could The Fed Tapering Impact The Stock Market?

  • (15:10) - Will Small Cap Stocks Outperform Going Forward?

  • (20:35) - Finding Trends With ETF Fund Flows



In this episode of ETF Spotlight, I speak with Matthew Bartolini, Head of SPDR Americas Research at State Street Global Advisors. We discuss the market outlook and best strategies for the fourth quarter of 2021.

September has been a tumultuous month for stocks. On Monday, the S&P 500 and the Nasdaq suffered their worst one-day declines since May on concerns surrounding the Chinese property developer Evergrande. Stocks are rebounding strongly today as those fears appear to have ebbed.

This comes after a record-breaking bull run for US stocks earlier this year. We may continue to encounter turbulence in the coming weeks on rising concerns about slowing economic growth, the Delta variant, and the possibility that the Fed may start tapering its asset purchases soon. What can investors expect from the fourth quarter of 2021?

Despite a record rally, stocks still look attractive compared to bonds thanks mainly to ultra-accommodative monetary policy.  While some investors are concerned about stretched valuations, the rally this year has been driven primarily by excellent earnings growth and most valuation metrics remain close to their levels at the beginning of the year.

As growth is expected to slow down in 2022, investors have started favoring stocks with more quality balance sheets and less volatile earnings, over the past few weeks. Matt likes strategies focused on dividend paying stocks with strong value bias. These can also provide diversification benefits to portfolios that have a lot of exposure to mega-cap tech stocks like Apple AAPL and Microsoft MSFT.

The SPDR S&P Dividend ETF SDY holds companies that have consistently increased their dividend for at least 20 consecutive years. Exxon Mobil XOM, AT&T T and Chevron Corporation CVX are its top holdings.\

In 2013, small caps had significantly outperformed other major asset classes from initial taper “tantrum” to the actual taper. State Street expects small caps to deliver strong performance again as taper suggests confidence in the economy.  Further, earnings growth estimates for small caps have not come down as much as those for large caps.

The SPDR Portfolio S&P 600 Small Cap ETF SPSM provides access to more than 600 small-cap stocks selected by the S&P index Committee. It has an expense ratio of just 0.05%. GameStop GME and Macy’s M are among its top holdings.

US listed ETFs have drawn monstrous inflows this year as investors love their low-cost, tax efficiency and transparency. We discuss recent fund flow trends.

Tune in to the podcast to learn more.

Make sure to be on the lookout for the next edition of the ETF Spotlight and remember to subscribe! If you have any comments or questions, please email

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AT&T Inc. (T) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Chevron Corporation (CVX) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Macys, Inc. (M) : Free Stock Analysis Report
GameStop Corp. (GME) : Free Stock Analysis Report
SPDR S&P Dividend ETF (SDY): ETF Research Reports
SPDR Portfolio S&P 600 Small Cap ETF (SPSM): ETF Research Reports
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