PFA Updates

Updates from Your Investment Committee Q3 2023

Oct 04, 2023

Hello Friends,

We just finished the third quarter of 2023, and it's the first negative quarter in the markets in the last twelve months. July was positive, but August and September both ended negative, so for the entire Q3 the S&P 500 ended down a little over 3%. [1] The months of August and September are typically associated with negative seasonality, as this two-month stretch has historically witnessed the worst performance relative to any other similar period of the calendar year. [2] Big picture, for the 2023 calendar year, all stock indices are still positive, but US Treasury bonds remain slightly negative. [3] Don't be surprised, or panicked, that your first monthly report from Schwab will show slightly negative returns for the month of September.

Your Investment Committee continues to meet regularly to review the markets and economy. We are hopeful the current market weakness will provide some opportunity to increase our stock allocations with the excess cash we hold in high yield money market positions. The yield on the Schwab money market funds is over 5%, with little market risk, so it does not feel too bad to be patient. Speaking of seasonality, the fourth quarter is one of the best historically for stock market returns, so we remain hopeful for a year-end rally into the holidays. [4] Below are some bullet point thoughts of interest:

What Concerns us in the Market and Economy
- the impact of a longer-term UAW strike
- an extended shut down of the Federal Government
- the recent increase in layoffs (yet unemployment remains below 4%)
- the increase in commodity prices (especially oil) since May 30th
- Fitch Ratings downgrade of US Debt on 8/1/2023. The S&P 500 has been negative since the announcement [5]

What We Like about the Market and Economy
- continued corporate profitability
- low unemployment
- the continued strength of consumer spending
- the continued resilience and growth of the economy
- the positive outlook of early Q3 S&P 500 company reports

Recent Quotes we find Interesting
- "since 1950, when the S&P 500 has risen 10% or more in the first half, the second half of the year has been positive 82% of the time with an average gain of 7.7%. The S&P 500 rose 16.9% in the first 6 months of 2023, which is a good sign historically." [7]
- "The next recession is unlikely to be as devastating as the ones in 2008-2009 or 2020. But our view remains that a recession is on the way." [8]
- "A 30% rise in oil prices since June 12, 2023, is not a bullish sign". [9] 
- "Consumer spending has been the driving force behind the US economy this year, and this strong consumer resilience continues in the face of a hostile monetary policy and heavy recessionary headwinds". [10]
- "Over the past 94 years, September is one of the few months to have actually averaged a net loss". [11]
- "On the positive side, the fact that Goldilocks showed up at the house at all suggests that people can envision a better economic future. But brace yourself for a few more ups and downs while Goldilocks gets chased around the cottage by the bears". [12]

Keep the faith friends, this soon shall pass. Let us know if we can answer any questions regarding your investment accounts or financial plans. Enjoy your Fall season!


The Team at Presper Financial Architects



Sign up for our e-newsletter to receive PFA updates by email along with additional insight and full market commentary.