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Opportunities abound in the markets, even during periods when the economy appears ripe for a regime shift. Recent growth metrics surprised to the upside, but leading indicators point toward some downside risk. In this edition of the Weekly Market Commentary, we examine potential opportunities amid a rotation in housing, buying patterns, and inflation.Inflation trajectory is favorable for risk assetsHeadline inflation in October was unchanged month over month, pulling the annual rate down to 3.0% from 3.4%. Markets often focus on the core services rate of inflation excluding housing, and that important category decelerated to under 4% for the first time since March 2021 (Figure 1). The improving environment likely encouraged Christopher Waller, a Federal Reserve (Fed) Governor, to suggest the Fed could hold rates steady at the upcoming meeting. Waller had been the most hawkish of the Fed officials, so this was a market-moving statement. Treasury yields and the U.S. dollar fell on the news. Some pundits argue the economy could experience a resurgence in inflation, but the resurgence narrative is misguided. In general, inflation is cooling, and markets could end up pleasantly surprised as inflation could cool faster than expected. Investors should expect additional Fed officials to tweak their language as they…
There is nothing like an eight-day winning streak to change the market narrative. Stocks have quickly gone from a correction to a comeback this month, and the S&P 500 is now challenging key resistance at 4,400. While a confirmed breakout above this level raises the odds of the correction being over, there are still a few boxes left to check on our technical list before making that call. One of the unchecked items is market breadth. Despite the recent rally, participation in the latest rebound has been underwhelming, raising questions over the sustainability of the advance. Second, 10-year Treasury yields remain in an uptrend, and until more technical evidence confirms the highs have been set, it may be challenging for stocks to maintain their upside momentum.From a Correction to a ComebackThe S&P 500 officially entered correction territory in late October after falling over 10% from its summer high. Rising interest rates and a steady drumbeat of higher-for-longer monetary policy messaging from the Federal Reserve (Fed) captured most of the blame for the selling pressure. The unexpected Israel-Hamas war, weak seasonal trends, and sputtering economic activity in China also weighed on risk appetite.As shown in Figure 1, the pullback created a wave…
Despite headwinds, the U.S. could experience structural changes in the labor market, residential real estate, and inflation as the post-pandemic economy progresses into the New Year. As markets adjust to a new regime, investors should recognize the economy is becoming less interest rate sensitive and they should focus on leading indicators such as the ratio of part-time workers and not on lagging metrics such as the headline growth stats mostly cited in the media.Setting Up for a ‘Eucatastrophe’J.R.R. Tolkien, author of the Lord of the Rings and famous member of The Inklings at Oxford University during the 1940s, coined a word—eu·ca·tas·tro·phe—to describe an event that turns out surprisingly better than expected. Frodo’s defeat sets up for an unpredictably successful conclusion.One could argue that the post-pandemic economy had a few moments when things turned out better than expected. The economy grew faster than expected in recent quarters, unemployment remained historically low, and some sectors such as homebuilders have boosted activity despite the macro headwinds. The tight labor market seems to be a boon for workers, and one could argue that workers have never been in a better position to bargain for better pay and more benefits, but more on that later…
In our latest Capital Planning Staff Spotlight, we caught up with Partner and Financial Advisor Jonathan Carpenter, CFP®, RICP®. While we all know Jonathan pretty well, it was a great opportunity to learn a few things - including what he loves to eat, why laundry is his weakness, and about his appreciation for an upcoming holiday. Read on to find out more! What’s your favorite food? Egg Sandwiches! I could eat an egg sandwich for breakfast, lunch, or dinner. It’s not uncommon in the Carpenter household to even have an egg sandwich for a midnight snack. Add a little American cheese, and sausage, and you created a delicate food item that is better than a wagyu steak. Just saying! What’s your least favorite chore around the house? Hands down, folding laundry! Raising 3 young boys who dirty their outfits every two seconds creates a lot of laundry, resulting in a lot of folding. It’s a daunting task trying to match bundles of socks, and remembering what pajamas belong to which son. However, I’m blessed with an amazing wife who makes time to handle this chore for our family. What’s your favorite holiday? Thanksgiving! We have been getting together with my…
U.S. Treasury yields have seemingly been moving in one direction lately (higher), with the 30-year Treasury yield temporarily breaching 5% for the first time since 2007. The move higher in yields (lower in price) has been unrelenting, with intermediate and longer-term Treasury yields bearing the brunt of the move. There are several reasons we’re seeing higher yields, but rates are moving higher alongside a U.S. economy that has continued to outperform expectations, pushing recession expectations out further, and by the unwinding of rate cut expectations to be more in line with the Federal Reserve’s (Fed) “higher for longer” regime. And with the economic data continuing to show a more resilient economy than originally expected, we think Treasury yields are likely going to stay higher for longer as well. As such, we now project the 10-year Treasury yield will end the year between 4.25% and 4.75% (previously 3.25% and 3.75%).The (Surprisingly) Resilient EconomyComing into the year, and further outlined within our Midyear Outlook 2023: The Path Toward Stability, our baseline forecast was for the domestic economy to slide into recession in late 2023 as consumer demand cooled, especially for services. Moreover, the economic slowdown, we thought, would likely keep the Fed from…
After a difficult September for stocks, investors are surely ready to flip the calendar to October. That’s the month that kicks off the historically strong fourth quarter. Expecting this pattern to repeat this year is tricky given the overhang of a government shutdown, interest rates near 16-year highs, a market still trying to digest the Federal Reserve’s “higher for longer” message, and a consumer who is facing some stiff headwinds as excess savings are drawn down, student loan payments restart, and the effects of higher borrowing costs are increasingly felt. Amid that complicated backdrop, here we assess prospects for a fourth-quarter rally.The OpportunityThe fourth quarter has historically been the best for stocks, and it hasn’t been a particularly close race. As you can see in Figure 1, the S&P 500 has posted an average gain during the quarter of 4.2%, widely outpacing the underwhelming 0.6% average gain in the third quarter. Furthermore, the index has finished higher nearly 80% of the time in the fourth quarter. While we can’t say with certainty why the quarter’s performance historically sticks out, it does usually overlap with updated full-year company guidance for the following year, portfolio window dressing into year-end, overall holiday season optimism,…
In our latest staff spotlight, we chatted with Founding Partner & Wealth Advisor David S. Bahnick, CLU®, ChFC®, RICP® .Not only did we learn that Dave is a huge fan of one local sports team and appreciates a great concert, but also who he would meet from history if he had the chance. Learn more below!What was your first paying job? My first job was a paper route at the early age of 11.What inspires you? Seeing things grow! Whether it is children gaining life skills, athletes getting better at sports, growing a business, or seeing portfolios grow - its all exciting.What’s the best concert you’ve been to? Tedeschi Trucks at Red Rocks! The music was great, the weather was perfect and I was with my family. How can you top that?Are you a sports fan? Who are your favorite teams? That's an easy one - E A G L E S - Eagles!What show are you currently binge-watching? I am currently binging two shows - Suits and The Chosen.Which historical figure would you most like to meet? Three come to mind immediately - Jesus Christ, Abraham Lincoln, and Ben Franklin. You can read Dave's full bio here >
India has emerged as a compelling economic growth story and an increasingly attractive alternative to China within the emerging markets complex. A growing population with a robust and young workforce, significant infrastructure spending, and an ongoing digital transformation have been key catalysts to India’s outperformance over China. India has also benefited from the de-globalization trend as manufacturers move production away from China. While we may not go as far as officially calling India the new China, the economic and technical trends suggest the country may be set for a prolonged period of outperformance.Growing Population & Robust WorkforceAn impressive growth story has propelled India into a major powerhouse across the global economic landscape. Over the last two decades, the country has made impressive strides in reshaping its economy by leveraging its growing population and improving its outdated infrastructure. At the core of the growth story is the largest consumer base in the world based on its population size of nearly 1.5 billion people, according to United Nations (UN) estimates. This places India as the most populous country in the world, overtaking China for the first time since the data series started in 1950. Of course, poverty remains a key issue among…
In our latest staff spotlight we caught up with one of our newest team members, Client Relationship Associate Brianna Belzner. What did we learn? Well, Brianna has some serious sewing skills, an appreciation of other languages, and her favorite season is right around the corner. Read on for more! Do you have any hidden talents or hobbies? Sewing! I know it’s an odd hobby for a 20-something to enjoy, but it is so satisfying and rewarding when I finally finish a project. I would consider myself more of a novice when it comes to sewing, but I love learning this old textile art. My most recent project was a maroon cotton dress. What was your favorite subject in school? I was always a fan of my Math and Spanish classes - hence why I studied them both in depth in college. Both subjects just always came naturally to me. (History was a much different case.) I loved being that classmate everyone turned to for an explanation as to HOW and WHY an equation is solved in a certain manner. I would get so much joy seeing their wheels turning and when their face told me it clicked! What’s your favorite…
As a rollercoaster August for the markets draws to a close with what looks to be a monthly loss for the S&P 500 Index, we look at what clues seasonality data may give us for stock market performance during September and the rest of 2023. Turns out that while October may be the month that contains Halloween, September has been the scariest month for stocks looking back over the past five and 20-year periods, as well as all periods back to 1950. The good news is that in all those time periods stocks have also on average bounced back with a much stronger October.August finishing in the red will break a five-month winning streak for the S&P 500, the longest such run since we saw seven up months in a row from February to August 2021 that was broken itself by a scary September 4.8% pullback. These strong spring to summer upticks have gone some way to dispelling the “Sell in May and go away” stock market cliché (as we explored earlier this year here), but September has been doing its best to restore credibility to this adage with the last three Septembers all down, with an average decline of 6%…
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