Recap | Week Ahead | Higher Rates

“It’s remarkable… the advantage people like us have by trying to be consistently not stupid, instead of trying to be very intelligent.” - Charlie Munger

Last week's market recap

The S&P 500 closed the week down -1.91%. Year-to-date the index is down -.89%
NASDAQ closed the week down -2.34%. YTD the index is down -.76%
U.S. Aggregate Bond index closed the week down -.87%. YTD the index is down -1.00%
10-Year Treasury Rate increased, ending the week at 4.77% up from 4.60% the prior week
- Fed Funds Target rate remains at 4.25-4.50%
The 1-Year Treasury is yielding 4.24%
A 6 Month Treasury is yielding 4.31%

The week ahead:

Inflation Data (CPI and PPI)
Retail Sales
Big Banks report Earnings: JP Morgan, Goldman, Wells Fargo, and Citigroup
Earnings: Taiwan Semi, UnitedHealth, and more

Market Comments:

The economy is strong.

The labor market is strong.

Odds of rates cuts have been going lower. As a result, bond yields are moving higher. The market coming to terms that we’ll need to value stocks at higher interest rates,

and this causes equities to struggle.

The 10 year treasury bottomed out in September at 3.60%. As rates have crept higher, it’s taken down parts of the market. First it was rate sensitive areas (Real Estate and Home Builders), then it moved onto small caps and value stocks. Now, it’s dragging down most or market. As long as rates go higher, equities could struggle.

However, earnings growth could justify higher stock prices. Contained inflation data could help ease rates.

The long term bull market remains intact. Increased volatility is expected. Higher yields create buying opportunities for bonds. Lower stock prices create opportunities for equities. Diversified portfolios can benefit from both.

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®

Gordon Shearer Jr., CFP®

Jeff Hilliard, CFP®, CRPC®

Joe McCaffrey, CFP®

Phillip Tompkins, CFP®

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