Broker Check

Q3 Market Update

| October 11, 2023

Last quarter we saw a modest pullback in stocks, mostly during September.  This occurred with a backdrop of rising interest rates (“higher for longer”). I would attribute the pullback to a few big picture themes.

  1. September is “seasonally” the weakest month for markets.
  2. Markets likely had to adjust to a “higher for longer” environment (The Fed expects interest rates to stay higher for longer then maybe most expected).
  3. Its normal for stocks to pull back after big gains and we are likely absorbing the outsized gains from the first half of the year.

Year to date the markets and our models are still enjoying a positive year.  Rather then focus on the last couple months you may want to look at the longer term, at least the past year. 

Changes to our models:

Maintaining a close to “neutral weighting” for stocks and continue to favor larger “growth” companies like Apple, Microsoft, and Nvidia (who makes chips and services for the artificial intelligence market).  We also added to smaller “value” companies that are not well known but could be comparatively undervalued (ever hear of IDEX, Builder’s FirstSource, or Booz Allen?).

Neutral on international. Not favoring international as a whole but added to Japan, a possible safer international haven. Domestic markets continued to be stronger and the dollar again turned up and made gains the last couple months.

We shifted to a “risk off” with high yield, closing out exposure that started back in January of this year.  Higher interest rates could continue to add pressure to the space. Additionally we continue to favor shorter and intermediate term bonds that are less susceptible to rising interest rates and has served us well throughout this rising rate cycle.  

Stocks are off to a better start in October and we’ll look for that to continue as positive seasonal trends kick in towards the end of the year!