Starting with the good news!
- Employment remains strong.
- United States economic growth has been resilient.
- This is seasonally the strong period of the year for stocks.
- Corporate Profit reports are in full swing (conceivably good news)
The storm clouds:
- Market is finally believing our Fed Chief. Higher interest rates for longer
- Housing market is crawling.
- Oil trading towards the high end of the current range
- Israel/Hamas war and its potential implications
- UAW strike
- Political issues
In the short-term, at least, much attention will be paid the Israel/Hamas war. In the past, similar issues abroad have only temporarily impacted our markets. As the blog is concentrated on the impacts of our economy, markets, and your retirement, watching the events unfold with the loss of life and bloodshed is extremely sad, upsetting and concerning.
This war like many in the past, has the potential to get deeper and have additional economic and human issues. Let us hope for the unexpected, a much shorter resolution than anticipated, with limited negative economic impact and loss of life.
Busy Week of Information
This week, the market and investors will have significant information to digest. Corporate profit reports jump into high gear with several majors reporting including Alphabet, Amazon, Meta, Microsoft, Visa, Chubb, GM, Royal Caribbean and more. Let us hope profit reports and guidance is positive, as the market can certainly use a catalyst.
On Thursday we will hear the 1st of 3 readings for the 3rd Quarter Gross Domestic Product (GDP). Estimates, 3.5% growth for the 3rd quarter. Resilient!! In the face of the issues, the economy is moving forward.
On Friday, we will hear the Fed’s favorite inflation report, the Personal Consumption Index (PCE).
Earnings, GDP, PCE and the war will keep us busy.
If the clouds turn into a storm, keep your heads, as all storms end. Our markets and economy have faced many challenges over the years, and we have persevered. Keep in mind, the weather person has been wrong many times.
Last week, nowhere to hide. Stocks across the major indexes fell as the Dow dropped (1.61%), the S&P 500 (2.32%), the Nasdaq (3.66%) and the Russell 2000 (2.26%). The Dow and Russell 2000 are negative for 2023.
The equal-weighted market indexes are now down year-to-date.
Over the pond, international stocks followed suit following (2.70%) and emerging markets joined in down (2.83%).
The yield on the 10-Year US Treasury is everyone’s current concern, ending the week with a yield of 4.914%. The 10-Year has been flirting with 5% which has both the stock and bond markets concerned.
Bonds are now down for 2023 as measured by the Bloomberg Bond Aggregate Index.
The yield curve is changing. The Fed has consistently stated, rates will remain higher for longer. Over the last couple of months, the 10-Year yield has been increasing, reflecting this realization. The significant rise in longer-term Treasuries has pushed the 30-Year Mortgage rate in the 8% range.
Mortgage rates moved from a low of under 3% to 8%. Impactful? Yes!
As you watch the news on television, cell phones and talk to friends and colleagues, it can be challenging to remain positive. I watch and listen to the same news media and have similar conversations with my friends and colleagues.
Keep in mind the news media captures better ratings with negative and upsetting stories. That tends to keep people watching and influences attitudes and behavior.
For me, the war is obviously concerning for several reasons. I will remain positive as I know the economy is in a longer-term transition from many years of artificially forced low interest rates to normalization. This process has bumps and bruises however the transition will, in time conclude and sunny days will shine bright.
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