Weekly Market Update 2-20-24

Feb 20, 2024 | Weekly Market Update

Week of 2-20-23 – Don’t Fight the Fed

The Federal Reserve (Fed) is the central bank of the United States. A longstanding bit of investment wisdom is: Don’t fight the Fed. It means that investors should align their strategies with the Fed’s monetary policy. Economic growth is influenced by Fed policy, and stock markets tend to reflect the economy, rising when it grows and falling when it contracts.1 As a result, Kent Thune of The Balance reported, when the Fed is:2

    • Tightening monetary policy by raising the federal funds rate to slow economic growth, investors should be cautious.
    • Easing monetary policy by lowering the federal funds rate to stimulate economic growth, investors can be more aggressive (within the boundaries of their risk tolerance and financial goals).

The Fed has left rates unchanged since last summer. In January, the Fed indicated that inflation was moving in the right direction, and the economy remained strong.3  It projected that the federal funds rate would fall to 4.6 percent by year-end, implying three rate cuts of 0.25 percent in 2024.4

The market did its own math and came to a different conclusion. It decided inflation would drop steadily, economic growth would falter, and the Fed would cut rates six times in 2024, reported Nicholas Jasinski of Barron’s.5

Last week, economic data suggested the Fed has yet to win its fight against inflation, although there was a sign that economic growth might be moderating.

    • The Consumer Price Index showed that inflation fell in January, year-over-year, but not as quickly as many economists had expected.6
    • The Producer Price Index revealed U.S. producer prices rose more than expected in January as the cost of services moved higher.7
    • Retail sales slowed dropped more than expected in January, suggesting that consumer spending (a primary driver of U.S. economic growth) might be slowing.8

The data caused markets to recalculate. Now, investors “have moved closer to the view of Fed policymakers, most of whom as of December penciled in 50 to 75 basis points of rate cuts by the end of 2024,” reported Howard Schneider and Michael S. Derby of Reuters.9

As markets adjusted to the revised outlook, major U.S. stock indices finished lower,10 and yields on longer maturities of U.S. Treasuries moved higher.11

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. 
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

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NOT A CORNERSTONE CLIENT?

With over 140 years combined team experience and 30 years in business, we are well-equipped to help you navigate the complexities of financial planning. Contact us today to schedule a complimentary, no obligation review with one of our advisors. Call 605.357.8553 or email cfsteam@mycfsgroup.com.

 

Sources

1 https://www.investopedia.com/ask/answers/042215/how-does-performance-stock-market-affect-individual-businesses.asp#

2 https://www.thebalancemoney.com/what-is-the-meaning-of-dont-fight-the-fed-2466886#

3 https://www.federalreserve.gov/monetarypolicy/files/monetary20240131a1.pdf

4 https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20231213.pdf

5 https://www.barrons.com/livecoverage/fed-december-meeting-speech-rate-decision-today/card/futures-markets-expect-6-rate-cuts-in-2024-versus-4-earlier-0GuZFQP7CW6pR1VEmOdr 

6 https://www.reuters.com/markets/us/view-warm-jan-us-cpi-reinforces-that-inflation-still-outside-fed-comfort-zone-2024-02-13/

7 https://www.marketwatch.com/story/producer-price-index-rises-0-3-in-january-core-ppi-up-0-6-69e79209

8 https://www.cnbc.com/2024/02/15/retail-sales-january-2024-.html

9 https://www.reuters.com/markets/rates-bonds/traders-see-rising-chance-fed-defers-first-rate-cut-beyond-june-2024-02-16/

10 https://www.barrons.com/market-data

11 https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202402

* These views are those of Carson Coaching, and not Raymond James, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with Raymond James.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider
whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is
accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* Raymond James financial advisors do not render advice on tax or legal matters. Discuss any tax or legal matters with the appropriate professional.

Weekly Market Update 10/23/23

Oct 23, 2023 | Weekly Market Update

Week of 10/23/23 – Thinking Big Picture 

 Today, investors have a myriad of worries that are creating tremendous uncertainty. A September Investopedia survey found investors are concerned about how their investments may be affected by: 

  • Inflation (59 percent),
  • The upcoming election (52 percent),
  • A possible recession, (51 percent)
  • Higher interest rates, (51 percent)
  • S.-China tension, (44 percent)
  • War in Ukraine (35 percent),
  • The United States’ credit rating downgrade (33 percent),
  • Climate disasters (20 percent), and other issues.1

Now, they’re also concerned about war in the Middle East.2

Sometimes, in the midst of uncertainty, it can be helpful to take a step back and look at the bigger picture. Consider the historical performance of the Standard & Poor’s (S&P) 500 Index. The current version of the Index debuted in 1957. That year, its average closing price was 44.42. Last week, the Index closed at 4,224.16.3

The S&P 500 didn’t travel in a straight line; a lot happened over that 66-year period. The United States experienced 10 recessions.4 The world witnessed dozens of wars, uprisings and regime changes. The Berlin Wall was built and torn down. Neil Armstrong walked on the moon. Russia defaulted on its debt and recovered. China and the U.S. normalized relations. The Chinese economy grew rapidly, as did the economies of many emerging countries. Americans experienced hurricanes Katrina, Sandy, Harvey and Irma, the savings and loan bailout, the global financial crisis, the Great Recession, 9/11, the COVID-19 pandemic, and so much more.

Some events roiled financial markets while others had little effect. When events have led to the S&P 500 losing value, the Index recovered. Sometimes it recovered quickly, sometimes it took more time. For example:

  • During the global financial crisis, the S&P 500 dropped from a high of 1,565 in 2007 to a low of about 752 in 2008. By 2013, it was trading at 1,848.3
  • At the start of 2020, when the COVID-19 pandemic arrived, The Index was at 3,258. It dropped to about 2,237, and then finished the year at 3,756.3
  • In 2022, when Russia invaded Ukraine, the S&P 500 started the year at 4,097 and fell to 3,577 following the invasion. By January of 2023, the Index was trading at 4,229.3

In each case, the Index recovered and moved higher over time.5 Of course, past performance is not indicative of future results.

Investor concerns about geopolitical events and market volatility can lead to poor decision-making, including investors selling stocks or moving to cash at times when they might be better off holding onto their portfolio or adding to it. The goal of investing is to buy low and sell high, and that takes enormous discipline. When investors see the value of their portfolios falling, they may become fearful and sell.

That can lock in losses and cause investors to miss out when the market rebounds.

Falling share prices can create opportunities to buy sound companies at attractive prices. If you would like to discuss opportunities in the current market or if you have concerns about the performance of your savings and investments, please get in touch. Together, we’ll review your financial goals, risk tolerance and portfolio allocation.

Last week, U.S. stock and bond markets headed lower after Federal Reserve Chair Jerome Powell indicated the fight against inflation is not over and rates are likely to stay higher for longer, reported Connor Smith for Barron’s.6,7 Yields on U.S. Treasuries moved higher.8

Weekly Market Update chart
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. 
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

Subscribe to our Weekly Market Update

* Please complete all fields to submit the form.
Thanks for signing up for our Weekly Market Update Email!

We're committed to providing you with valuable information and insights.

NOT A CORNERSTONE CLIENT?

With over 140 years combined team experience and 30 years in business, we are well-equipped to help you navigate the complexities of financial planning. Contact us today to schedule a complimentary, no obligation review with one of our advisors. Call 605.357.8553 or email cfsteam@mycfsgroup.com.

 

Sources

1 https://www.investopedia.com/investors-grow-more-fearful-amid-high-rates-and-political-uncertainty-8346786

2 https://www.cnn.com/2023/10/13/investing/premarket-stocks-trading-defensive-assets-war/index.html

3 https://www.macrotrends.net/2324/sp-500-historical-chart-data

4 https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions

5 https://www.nasdaq.com/articles/a-short-history-of-the-great-recession#

6 https://www.barrons.com/market-data

7 https://www.barrons.com/livecoverage/stock-market-today-102023/card/stocks-continue-falling-following-powell-remarks-AcNKHjXphXTuytE76eUq

8 https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202310

* These views are those of Carson Coaching, and not Raymond James, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with Raymond James.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider
whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is
accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* Raymond James financial advisors do not render advice on tax or legal matters. Discuss any tax or legal matters with the appropriate professional.

Weekly Market Update 10/16/23

Oct 16, 2023 | Weekly Market Update

Week of 10/16/23 – Markets Were Resilient

 

Last week, investors had a lot to process – geopolitics, inflation, consumer sentiment, the possibility of government shutdown – and markets were volatile. Toward the end of the week, some investors were reassured when earnings season kicked off with reports showing major banks posted stronger-than-expected profits during the third quarter.1 Here’s a brief look at what happened during the week:

War in Israel. Hamas terrorists attacked Israel, and Israel declared war. The human toll has been high and continues to increase. The conflict has potential to spread across the region. While economics is a lesser concern, the war may disrupt energy supplies, keeping inflation – and interest rates – higher for longer, according to Ziad Daoud, Galit Altstein and Bhargavi Sakthivel of Bloomberg.2

U.S. inflation proved persistent. In September, the Consumer Price Index (CPI) showed prices rose 3.7 percent year-over-year. When volatile food and energy prices were excluded, inflation was 4.1 percent year-over-year.3 Inflation has fallen a long way from its June 2022 peak of 8.9 percent, but the decline has stalled, and inflation remains well above the Federal Reserve’s two percent target.4 That reinforces the idea that the U.S. Federal Reserve may leave rates higher for longer, reported Chris Anstey of Bloomberg.5

Consumers were less optimistic. Inflation is affecting the finances of individuals and businesses, according to the University of Michigan’s Surveys of Consumers Director Joanne Hsu. The October consumer sentiment survey found, “Assessments of personal finances declined about 15%, primarily on a substantial increase in concerns over inflation, and one-year expected business conditions plunged about 19%. However, long-run expected business conditions are little changed, suggesting that consumers believe the current worsening in economic conditions will not persist.”6

U.S. budget negotiations remained stalled. Congress has about a month left to negotiate and pass the appropriations bills necessary to fund the U.S. government for fiscal 2024. However, the House of Representatives currently cannot proceed without an elected Speaker of the House. On November 17, stop-gap funding measures end. Without additional funding measures a government shutdown is possible, reported David Morgan, Richard Cowan, and Moira Warburton of Reuters.7

Banks did well in the third quarter. Earnings season got off to a good start last week. Major U.S. banks were the first to report, and some saw profits rise significantly in the third quarter.1 One large bank reported its profit was 35 percent higher, year-over-year.8

Major U.S. stock indices finished a volatile week higher.9 Bond markets produced mixed results with yields on longer maturities of U.S. Treasuries moving lower.10

Weekly Market Update
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. 
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

NOT A CORNERSTONE CLIENT?

If you have questions about your financial plan please contact us today to schedule a complimentary, no obligation review with one of our advisors. Call 605.357.8553 or email cfsteam@mycfsgroup.com.

 

Sources

1 https://finance.yahoo.com/news/nasdaq-sinks-dow-edges-up-after-healthy-big-bank-earnings-stock-market-news-today-164152139.html

2 https://www.bloomberg.com/news/features/2023-10-12/israel-hamas-war-impact-could-tip-global-economy-into-recession?srnd=markets-vp 

3 https://www.bls.gov/news.release/pdf/cpi.pdf

4 https://fred.stlouisfed.org/graph/?g=rocU

5 https://www.bloomberg.com/news/articles/2023-10-12/us-cpi-report-september-2023-5-key-takeaways-on-inflation-core-measure

6 http://www.sca.isr.umich.edu

7 https://www.reuters.com/world/us/us-house-republicans-seek-unite-around-new-speaker-2023-10-11/

8 https://www.cnbc.com/2023/10/13/jpmorgan-chase-jpm-earnings-3q-2023.html

9 https://www.barrons.com/market-data (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2023/10-16-23_Barrons_Data_9.pdf)

10 https://home.treasury.gov/resource-center/data-chart-center/interest-rates/TextView?type=daily_treasury_yield_curve&field_tdr_date_value_month=202310

* These views are those of Carson Coaching, and not Raymond James, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with Raymond James.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider
whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is
accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* Raymond James financial advisors do not render advice on tax or legal matters. Discuss any tax or legal matters with the appropriate professional.

Weekly Market Update 10/9/23

Oct 11, 2023 | Weekly Market Update

Week of 10/9/23 – Financial Markets Lost Ground in Q3

 

–  While year-to-date returns for the Standard & Poor’s (S&P) 500 Index remain above the historic average, which was 10.24 percent, including dividends, from 1973 to 2022,1 the rally in U.S. stocks stalled during the third quarter of 2023, reported Lewis Krauskopf, Ankika Biswas and Shashwat Chauhan of Reuters.2

Early in the quarter, U.S. stocks gained, driven higher by better-than-expected corporate earnings, falling inflation and optimism that the Federal Reserve (Fed) might be near the end of its rate-hiking cycle. Since March of 2022, the Fed has lifted the Federal Funds effective federal funds rate from near zero to 5.33 percent3 and reduced its bond holdings by $1 trillion through quantitative tightening, reported Michael S. Derby of Reuters.4

The Fed’s actions are designed to bring inflation lower by slowing economic growth and reducing demand for goods and services. However, the U.S. economy continues to hum along. The labor market has been particularly resilient. Last week’s employment data showed number of jobs created in September was almost double the Dow Jones consensus estimate, reported Jeff Cox of CNBC.5 The U.S. unemployment rate remained near historically low levels, and the labor force participation rate increased over the quarter.6

The strong economy has been a source of significant uncertainty. Some economists believe it is an indication the Fed has engineered a soft landing and inflation will reach targeted levels without a recession, although 60 percent of the economists surveyed by Bloomberg continue to say a recession is ahead, reported Rich Miller, Molly Smith and Kyungjin Yoo.7

Government turmoil also has created uncertainty. In early August, Fitch Ratings surprised financial markets by lowering its rating on U.S. Treasuries from AAA to AA+. The company indicated that “a high and growing general government debt burden, and the erosion of governance” were the impetus for the downgrade.8

In September, when Congress debated whether to approve the necessary appropriations bills to fund the U.S. government for fiscal 2024, Moody’s Investors Service – the only remaining major credit rating agency to award U.S. Treasuries a AAA rating – warned that a government shutdown would be a “credit negative” event, reported Matt Phillips of Axios.9 Congress temporarily avoided a government shutdown by passing a continuing resolution that provides funding through mid-November.10

By the end of the quarter, optimism that the end of the Fed’s tightening cycle was near had faded amid uncertainty about the strength of the economy, the possibility of a government shutdown, and a growing number of labor disputes. In late September, the Fed released its economic projections, making it clear that an additional rate hike was possible in 2023, and rate cuts were unlikely before 2024.11

The Fed’s hawkish outlook helped push stock and bond markets lower. In late September, the S&P 500 Index was down about 7 percent from its July high.2 From August through September, the yield on the 10-year U.S. Treasury note rose from 4.05 percent to 4.59 percent.12 Bond prices fall as yields rise.

Last week, despite the strong jobs report bolstering the likelihood of another Fed rate hike, the S&P 500 and Nasdaq Composite Indices moved higher. The Dow Jones Industrial Index lost ground.13 Yields on U.S. Treasuries generally moved higher over the week.12

Weekly Market Update
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. 
Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

NOT A CORNERSTONE CLIENT?

If you have questions about your financial plan please contact us today to schedule a complimentary, no obligation review with one of our advisors. Call 605.357.8553 or email cfsteam@mycfsgroup.com.

 

Sources

1 https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

2 https://www.reuters.com/markets/us/futures-climb-treasury-yields-ease-ahead-key-inflation-data-2023-09-29/

* These views are those of Carson Coaching, and not Raymond James, and should not be construed as investment advice.
* This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with Raymond James.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce. * The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider
whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is
accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* Raymond James financial advisors do not render advice on tax or legal matters. Discuss any tax or legal matters with the appropriate professional.