More Storms Ahead? | Oct. 20, 2023

AUTHOR: Jason Roque, CFP®, APMA®, AWMA®
TITLE:   Investment Adviser Rep – CCO
TAGS:   S&P 500, NASDAQ, Retail Sales, Housing, Jobs

Equities and Bonds had a rough week. Is this a signal of more storms ahead or a light at the end of the tunnel?

Monday                       S&P 500 1.06% | NASDAQ 1.20%

Manufacturing, as reported by the Empire State Index, slowed in October. The Oil markets saw relief in pricing, as did Gold Markets. Equities rose on the day as a result of the softer inflationary pressures.

Tuesday                       S&P 500 0.01% | NASDAQ 0.25%

Retail sales came in stronger than expected for September. This pushed rates higher as it is a signal that the consumer is still spending. Surprisingly, equity markets remained fairly untouched by rates rising.

Wednesday                 S&P 500 1.34% | NASDAQ 1.62%

Housing starts and building permits performed well for September, given the rate environment. That strong performance pushed rates even higher as the consumer continues to show unanticipated strength. Higher rates led to bleeding in the equity markets this time.

Thursday                     S&P 500 0.85% | NASDAQ 0.96%

Weekly initial unemployment claims fell below 200K for the first time since March. This is a good signal for workers, however not a great signal for future Federal Reserve Board (FRB) rate hikes. The move lower could mean the FRB has more leeway to push rates higher. Additionally, FRB Chair Powell spoke on Thursday, causing markets concern. The message had a cautionary tail that we may be at elevated rates for quite some time.

Friday                          S&P 500 1.26% | NASDAQ 1.53%

The Israel-Hamas conflict likely played into the close of the week selloff. The weekend news cycle is too long for investors to feel comfortable with being long certain equities. The buy side Friday was centered around safe-haven assets.

Conclusion                  S&P 500 2.39% | NASDAQ 3.16%

The week saw a crushing blow to what had been a fairly decent October. The rise in rates to meet the FRB forecasting and the risks of Israel-Hamas proved too much for bulls. Interestingly, much of the off days for the market came on positive news out of the economy. Economic resilience in consumption, housing, and employment all led to equity market selloffs. This should increase the likelihood of a soft landing, which may very well be what markets priced in last week. If that is the case, the prospects of a recession in 2024 are dwindling.

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Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services. Broad diversification across several asset classes with a long-term holding strategy is the best strategy in any market environment.
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