“The stock market has predicted nine of the last five recessions.” - Paul Samuelson
Last week's market recap:
- The S&P 500 was up 3.97% for the week. Year-to-date the index is down -17.09%.
- Large-Cap Value leads performance YTD at -8.88%
- NASDAQ closed the week up 2.25% and is down -28.59% YTD.
- Barclays Aggregate Bond index is down -15.36% YTD.
- 10-Year Treasury Rate decreased, ending the week at 4.02% from 4.21% the prior week.
- Fed Funds Target rate is 3.25%
- The 1-Year Treasury is yielding 4.61%
- A 6 Month Treasury is yielding 4.57%
- What is your savings account rate? If it didn’t increase recently, you may want to find a new savings account.
The week ahead, 10/31:
- Fed Meeting
- Jobs Data (JOLTS and nonfarm payroll)
There are a lot of conflicting signals out there. Last week’s GDP was strong. It supports an argument that a soft landing is possible. However, real GDP could easily contract in both the fourth and first quarter as the Fed’s rate hikes filter into the system. Big tech earnings saw a noticeable decline last week, yet consumer discretionary showed strength. The Dow is on track for its best monthly performance since 1976. You can have sharp rallies in bear markets. This week, the focus will be on Jobs Data and what the Fed says after their meeting. A 75bp hike is expected, but the market will be listening closely to understand their path going forward. “The Federal Reserve can’t risk not getting on top of inflation. Even though the risk of doing too much is a recession, the risk of not doing enough is that inflation just stays high and you have a bigger downturn later.” - Nick Timiraos (Chief Economics Correspondent, Wall Street Journal).
It is important to note, it’s possible to both slow the pace of rate hikes and raise the terminal rate. The Fed could hike slower for longer. It is also important to note, the stock market could also rally on the bond market stabilizing. Most of the damage to the bond market is probably behind us, but that doesn’t mean it’s over.
Below is an interesting chart ahead of Jobs Data. It shows workforce participation dropping due to aging. This is only set to get worse as the population ages.
As always, let us know if you have any questions.
CRA Investment Committee
Matt Reynolds CPA, CFP®
Tom Reynolds, CPA
Robert T. Martin, CFA, CFP®
Gordon Shearer Jr., CFP®
Jeff Hilliard, CFP®, CRPC®
Joe McCaffrey, CFP®
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