Quarterly Market Outlook

The S&P 500 rose to the highest level since March 2022 early in the third quarter but rising global bond yields, fears of a rebound in inflation and concerns about a future economic slowdown weighed on the major indices in August and September and the S&P 500 finished the third quarter with a modest loss.

Below are highlights of the 3rd Quarter (Q3) and our investment committee’s outlook for the 4th Quarter of 2023 (Q4). Links will take you to our brief or expanded discussions, if interested.

3rd Quarter Wrap

  • Q2 earnings season was better-than-feared with mostly favorable corporate guidance which supported expectations for strong earnings growth into 2024

  • Volatility returned to markets during the third quarter, as rising bond yields pressured stock valuations, some inflation indicators pointed to a bounce back in inflation and the Fed reiterated a “higher for longer” interest rate outlook.

  • Q3 Wrap - brief

  • Q3 Wrap - full detail

ECONOMICS: The Unstoppable Consumer

  • Consumers have been able to continue to spend because of the flow of income coming from employment.

  • Household debt has increased but as a percentage of GDP is still lower than during the Great Financial Crisis and the cost of debt servicing is the lowest it has ever been.

  • Economics – brief

  • Economics – full detail

3rd Quarter Performance

  • Rising bond yields were the main driver of the markets in the third quarter as high Treasury yields caused reversals in performance on a sector and index basis, relative to the first and second quarters.

  • Internationally, foreign markets saw moderate declines and again lagged the S&P 500 in the third quarter as disappointing economic data in Europe and China bolstered regional recession fears.

  • Q3 Perf - brief

  • Q3 Perf - full detail

POLICY: First Look at the 2024 Race

  • The 2024 presidential race is looking like a 2020 rematch between President Biden and former President Trump.

  • Risk of a government shutdown continues to hang over Washington and will affect voter sentiment.

  • Policy – brief

  • Policy – full detail

4th Quarter Market Outlook

  • There are real risks to both the markets and the economy as we begin the final three months of the year. But these are largely the same risks that markets have faced throughout 2023 and over that period the economy and markets have remained impressively resilient. So, while these risks and others must be monitored closely, they don’t present any new significant headwinds on stocks that haven’t existed for much of the year.

  • Q4 Outlook - brief

  • Q4 Outlook - full detail

STRATEGY: Cracks in Commercial Real Estate?

  • The shift to remote and hybrid work during the pandemic has shaken up commercial real estate (CRE) and now the cracks are starting to deepen, even as businesses push employees to return to the office.

  • “For sale” signs on high rises are growing. Defaults on commercial loans are rising. Debt refinancing is more expensive.

  • Strategy – brief

  • Strategy – full detail

Authenticity

Trust

Competence

Caring

Connecting

Balance

Focus

Closing Note

As we begin the final quarter of 2023, we remain vigilant towards economic and market risks and are focused on managing both risk and return potential. We remain firm believers that a well-prepared, long-term-focused, and diversified financial plan can withstand virtually any market surprise and related bout of volatility, including “higher for longer” interest rates, stubbornly high inflation, geopolitical tensions, and recession risks.

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