Week Ending September 10th, 2021

Stock indices pulled back this week on slowing recovery worries. The market participants turned slightly bearish due to weak August payrolls, new signs of rising inflation, very tight labor market and the expectations that  Fed is going  to start tapering in late November.

I think this small pullback so far only reflects the changing mindset of the market participants and it only represents that participants are reassessing the risks to their future expectations. Buy the Dip camp is also on the 'wait and watch' mode it seems, probably the dip buyers are hoping for a little more downside before they jump back into the market.

Growth scares and small pullbacks  are part of the midcycle phase and it is generally believed that midcycle pullbacks are short lived. I don't think majority of the market participants at the moment seem so worried about the start of taper amid expectations of slowing recovery and signs of inflation becoming more stickier than being expected.

Yes investment portfolios need to have some kind of  protection going forward and I don't think Bond funds can act as best portfolio stabilizers.