Bull markets are built on walls of worry - George Soros and many famous Wall Street Professionals
Last week's market recap:
- The S&P 500 was down -2.88% for the week. Year-to-date the index is down -23.87%.
- Large-Cap Value leads performance YTD at -17.78%
- NASDAQ closed the week down -2.68% and is down -32.00% YTD.
- 10-Year Treasury Rate increased, ending the week at 3.83% from 3.69% the prior week.
- Fed Funds Target rate is 3.25%
- The 1-Year Treasury is yielding 3.98%
- A 6 Month Treasury is yielding 3.78%
- What is your savings account rate? If it didn’t increase recently, you may want to find a new savings account.
The week ahead:
- OPEC+ Meeting
- Auto Sales
- Manufacturing Data
Being bearish is easy right now. The fourth quarter looks to be another tough quarter for public markets; HOWEVER, investors should not be overly pessimistic. Right now, S&P 500 forward multiples are roughly 9% below their long-term average. High quality fixed income valuations are currently at 10-year lows. These attractive valuations, along with elevated interest rates, should be welcomed by investors. The combination of the two has historically led to significant long-term investment opportunities.
“Bull markets are Built on Walls of Worries”
Fed Funds Rates:
The Fed has moved extremely fast with their tightening. The Terminal Rate sits at 4.6%, based on the expected upcoming hikes. The good news is the Fed constantly changes their mind because, they are not good at predicting the future. Their dot plot constantly changes and can change quickly. This is why they always say, “they’re data dependent.” The markets want the Fed to recognize that the impact of rate hikes works on a lag. Please slow down or pause!
Great Britain’s Economic Quagmire Simply Explained:
- UKs political agenda was in direct opposition to their central banks. (Other countries should be taking notes!)
- Last week, the new UK Chancellor announced plans to stimulate their economy, implying a steep rise in government borrowing. This is inflationary, at a time when UK inflation is already red hot running over 10% per year.
- Anticipating a supply of new UK government debt, investors (especially pension funds) sold UK bonds, sending yields MUCH higher (bond values plummeted). Hence, the British pound plummeted against the dollar, and other major currencies.
- Today, the UK government reversed course, and confirmed they will scrap its plans to cut taxes for the country’s highest earners. Today, The British pound is rising sharply against the dollar. This is good for the U.S. stock market.
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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