Last week's market recap:
- The S&P 500 closed the week down .61%. Year-to-date the index is down -15.60%.
- Large-Cap Value leads performance YTD at -6.33%
- NASDAQ closed the week down -1.50% and is down -28.21% YTD.
- Barclays Aggregate Bond index is down -13.40% YTD
- 10-Year Treasury Rate increased slightly, ending the week at 3.83% from 3.81% the prior week.
- Fed Funds Target rate is 4.00%
- The 1-Year Treasury is yielding 4.74%
- A 6 Month Treasury is yielding 4.68%
- What is your savings account rate?
The week ahead:
- New Home Sales
- Consumer Sentiment
Since the surprisingly lower CPI print on October 13th, inflation expectations have dropped. The terminal rate is lower. Treasury yields dropped. The dollar strengthened. Stocks rallied.
So is this a bear market rally? Maybe. Bears will argue that earnings estimates need to come in. We agree, but the S&P 500's forward p/e has already contracted by 35%.
With the exception of a black swan event, much of the downside in equities and bonds has probably already occurred, but that doesn’t mean markets will go higher from here.
The risk of the Fed overtightening is still on the table.
Source: Census Bureau, BLS, J.P. Morgan Asset Management. *Nominal retail sales expressed in Sept. 2016 dollars.
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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