Market & Economic Insights for September 2023
INSPIRATION: “The leaf of every tree brings a message from the unseen world. Look, every falling leaf is a blessing.” — Rumi
As we step into September, the winds of change are once again rustling the leaves of our financial world, just as the autumn breeze is whispering in the air. Change, in its many forms, is a steadfast companion in the journey of life, and it manifests itself in our portfolios just as it does in the shifting seasons.
As we approach the upcoming Labor Day weekend, I find myself reflecting on the personal changes in my life, particularly the transition into an empty nest having sent my two younger kids off to college. The analogy of the changing seasons is poignant, as the familiar routines of summer gradually give way to the promise of fall. Children return to school or embark on new adventures in college, and we, too, must adapt to the rhythms of change. While transitions can be challenging, they also herald opportunities for growth, whether in our careers, personal lives, travel experiences, or the pursuit of new aspirations.
Turning our gaze to the financial markets, we find that they have not escaped the influence of seasonal patterns. August, historically known for its summer doldrums, has seen a modest retreat in performance. However, I must stress that this downturn does not warrant undue concern at this juncture. Instead, let us look ahead to September 19-20, when the Federal Reserve convenes, as it promises to be a pivotal moment. Fed Chair Powell's recent words in Jackson Hole echo in our minds: "Today's inflation remains too high, and the central bank is prepared to raise rates further if appropriate." We’ll see if inflation continues to tick lower if that will be enough to pause further rate hikes with the increased unemployment figures or not. At the very least, most expect rates to fall come 2024.
Let's delve into the financial metrics for August 2023:
The Dow Jones Industrial Average saw a decline of 2.4%, the Nasdaq Composite fell 2.2%, and the S&P 500 experienced a 1.7% pullback from its previous highs.
The yield on 10-year Treasuries, adjusted for inflation, stands at 2%, exerting pressure on assets with lofty valuations.
Anticipate a correction in Price-to-Earnings (P/E) ratios, moving from the current average of 20% in the S&P 500 to a more historically normalized 17%.
The burgeoning U.S. deficit has elevated borrowing costs, exerting additional strain on the broader economy.
Job growth exhibited a slowdown in August, with the unemployment rate surpassing expectations at 3.8%.
Both the Consumer Price Index (CPI) and Producer Price Index (PPI) registered at 2.7% for July 2023. The forthcoming reports will be closely watched for further insights into inflation trends.
In terms of our investment strategy, we find that no radical adjustments are necessary. Our emphasis on quality investments that can navigate both offensive and defensive scenarios remains paramount. As September unfolds, we will execute modest rebalancing to ensure portfolios remain aligned with long-term objectives and asset allocations.
In closing, just as the seasons change and bring renewal, so too does the financial landscape evolve. Embrace these transitions with a discerning eye, and let us navigate this dynamic environment together, always keeping an eye on the horizon for opportunities amidst the winds of change. Going into a new election season in 2024, I predict funny business and tension which could impact portfolios, once again, our active management strategy lets us move swiftly as bumps arise - have no fear about that! History repeats itself - a tenet of technical analysis.
Wishing you all a delightful Labor Day weekend and a prosperous September.
Warm regards,
Lisa Durant
President, Lion’s Eye Wealth
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