Recap | Week Ahead | A.I. Scrutiny

“In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” – Benjamin Graham

Last week's market recap:

The S&P 500 closed the week down -.56%. Year-to-date the index is up 11.77%
NASDAQ closed the week down -1.99%. YTD the index is up 9.95%
U.S. Aggregate Bond index closed the week up .56%. YTD the index is down -.54%
10-Year Treasury Rate decreased, ending the week at 4.94% down from 5.00% the prior week
Fed Funds Target rate remains at 3.75-4.00%
The 1-Year Treasury is yielding 4.38%
A 6 Month Treasury is yielding 4.28%

The week ahead:

October Jobs Report
PMI (Inflation data)
U.S. / Iran Conflict
Corporate Earnings: Apple, Palantir, Advanced Micro Devices, Marathon Petroleum, Toyota, Uber, McDonald’s, and many more.

Quick Comments:

The market continued to rotate away from mega-cap tech stocks last week as investors question if/when massive AI investments will pay off. Demand for AI remains strong but the bar for companies to justify their spending is getting higher.

Economy Remains Resilient

Q3 GDP grew by 3.4% annualized.
Core PCE increased into the 3.1%, remaining above the Fed’s 2% target, but 3.1% isn’t extremely high.
The Fed held interest rates.

Takeaway

Tech companies are being valued on whether their spending is producing sufficient near-term revenue, earnings, and cash flow.
We’re seeing a market rotation away from tech.
Equity gains should be able to continue in a higher yield environment.
Earnings strength has helped equity markets absorb higher yields.

An uptick in volatility should be expected, but resilient economic growth and solid corporate earnings should provide optimism. Diversification and disciplined investing are extremely important in this environment.

As always, let us know if you have any questions.

Best,

CRA Investment Committee

Matt Reynolds CPA, CFP®

Tom Reynolds, CPA

Robert T. Martin, CFA, CFP®

Joe McCaffrey, CFP®

Gordon Shearer Jr., CFP®

Jeff Hilliard, CFP®, CRPC®

Phillip Tompkins, CFP®

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