This is Alex Newman from Grape Wealth Management, and I would like to provide a professional insight into the recent market phenomena and what we can anticipate for the concluding quarter of 2023.
Recent Market Overview:
The market recently witnessed a notable downturn in the third quarter, with the S&P 500 experiencing a nearly 5% fall in September and an overall 3% drop for the quarter, reflecting the first quarterly loss in a year. The landscape has been significantly influenced by the recalibration of expectations for the Federal Reserve’s future policy, impacting market sentiment due to implications of prolonged restrictive monetary conditions.
Key Market Insights:
Interest Rates as a Catalyst: The apex in rates has predominantly driven financial markets recently, leading to a surge in interest rates. The 10-year Treasury yield rose above 4.6% last week, marking the highest since 2007. However, such episodes have historically been followed by stock-market rallies, presenting potential lucrative catalysts.
Market Resilience in Q4: Historically, poor performances in the third quarter have often paved the way for substantial gains in the fourth quarter. Specifically, since 1990, the S&P 500 has rebounded nine times out of eleven, reflecting an average return of 10.6% in the final three months of the year after a decline in the third quarter.
Volatility Indications: The volatility index reflects an atmosphere of pessimism but not panic, indicative of a more orderly pullback where risks are more visible and balanced by positive factors such as a healthy labor market, declining inflation, and resilient corporate profits.
The further decline in the PCE inflation measure last month, signaling the first drop below 4% in over two years, is indicative of favorable conditions despite the prevailing uncertainties.
While market weaknesses may persist due to lower volatility, the potential impacts on the economy and market due to any governmental shutdown are anticipated to be temporary.
The broader uptrend in equities appears to be intact despite existing market corrections, and the prevailing conditions present compelling opportunities for well-informed and strategic investments.
Market Statistics (as of 9/29/2023):
Dow Jones Industrial Average: 33,508 (-1.3% Week, 1.1% YTD)
S&P 500 Index: 4,288 (-0.7% Week, 11.7% YTD)
NASDAQ: 13,219 (0.1% Week, 26.3% YTD)
10-yr Treasury Yield: 4.58% (0.2% Week, 0.7% YTD)
Oil ($/bbl): $90.91 (1.0% Week, 13.3% YTD)
Bonds: $94.03 (-1.1% Week, -0.9% YTD)
Upcoming Economic Data:
Important economic data being released this week include several labor market readings such as the JOLTS Job Openings report and the unemployment rate for September, which will be crucial in assessing the market’s future trajectory.
The overall market sentiment is cautiously optimistic, balanced by visible risks and positive economic indicators. As we traverse through these sophisticated market conditions, strategic adaptation and informed decision-making will be paramount in capitalizing on emerging opportunities and navigating through potential risks.
Founder of Grape Wealth Management