“If I could turn back time”— Cher

Key Highlights:

1) The Federal Reserve left its benchmark rate unchanged for the second meeting in a row as inflation has continued to cool and the labor market is gradually coming more into balance. The official policy statement from the Federal Reserve hinted at a more dovish tone in that they seemingly will need more convincing data to increase rates further, although reserving the right to do so if deemed necessary.

2) While there are many signs of a weakening U.S. economy, the Federal Reserve cannot let their guard down in the battle against inflation. The initial read of the 3rd quarter GDP coming in at 4.9% annualized is just one example that the economy is not yet ready to roll over. It does, however, bolster the chances that the Federal Reserve may be able to engineer the rare “soft landing” and potentially avert a recession.

3) The futures market is now forecasting less than a 25% chance of another rate hike, signaling a possible end of the most aggressive tightening cycle in four decades.

“Like sands through the hourglass, these are the days of our lives.”:

Stocks declined for the third straight month, with the Dow Jones Industrial Average falling 1.26%, the S&P 500 slipping 2.10%, and the NASDAQ giving up 2.76%. Globally, Emerging Markets fell 3.87% and EAFE lost 4.04%. Small and mid-cap stocks were the most adversely affected; the Russell 2000 dove 6.82%, while the large-cap Russell 1000 gave up only 2.42%. Fixed Income also moved lower as interest rates rose. The Bloomberg US Aggregate fell 1.58% in the month.

After being the only US stock sector to finish in the black for the last two months, Energy was the biggest laggard in October, with a 5.8% decline. Only Utilities and Technology advanced higher in October, up 1.3% and 0.1%, respectively.

The Economic Data Rundown:

US Treasury Yields

The yield curve trended toward normalcy in October. Yields on the 3-year, 5-year, 10-year, 20-year, and 30-year treasuries all increased by double-digits, with the 30-year logging the largest rise of 31 basis points. The 20-year and 30-year both eclipsed 5% for the first time since July 2007, ending the month at 5.21% and 5.04%, respectively. Italy’s Long-Term Bond Interest Rate was overtaken by the US 10-year, and Japan’s 10 Year Government Bond Interest Rate neared 1% in October.

Employment

The U.S. economy saw job creation decelerate in October. Nonfarm payrolls increased by 150,000 for the month, the Labor Department reported Friday, against the Dow Jones consensus forecast for an increase of 170,000. The unemployment rate rose to 3.9%, against expectations that it would hold steady at 3.8%. Employment as measured in the household survey, which is used to compute the unemployment rate, showed a decline of 348,000 workers, while the rolls of the unemployed rose by 146,000.

Consumers and Inflation

At 3.70%, the US inflation rate for September was essentially unchanged from August’s 3.67% level. Core Inflation decreased for the sixth straight month, down from 4.35% in August to 4.15% in September. The US Consumer Price Index Month-over-Month (MoM) rose 0.40% in September, while US Personal Spending MoM accelerated 0.74%. The Federal Reserve kept the benchmark Target Federal Funds Rate unchanged at 5.50% for the second consecutive FOMC meeting, which took place on November 1st.

Production and Sales

The US ISM Manufacturing PMI dove by 2.3 points in October to 46.7, breaking a streak of three consecutive monthly increases and returning to contraction territory. US Retail and Food Services Sales MoM grew by 0.71% in September, and the Year-over-Yer (YoY) US Producer Price Index rose by two-tenths of a percentage point to 2.17%.

Housing

US New Single-Family Home Sales MoM rebounded by 12.3% in September following an 8.2% contraction in August. September marked the largest MoM increase for new single-family homes since August 2022. US Existing Home Sales were down 2%, sinking for the fourth consecutive month and 18th out of the last 20. The Median Sales Price of Existing Homes fell below $400,000 for the first time since May to $394,300. September also marked the third consecutive month in which median prices for existing homes fell. Mortgage rates again reached new highs in October—the 15-year Mortgage Rate topped 7% for the first time since December 2000, and the 30-year ended the month at 7.79%.

Commodities

The price of Gold rebounded 6% in October, from $1,870.50 to $1,982.90. After breaching $90 per barrel in September, the price of WTI oil reversed course in October and ended the month at $83.03 per barrel, a decline of 8.5%. The price of Brent fell 5.35% to $90.73 per barrel but stayed above that key $90 level. Lower oil prices helped deliver drivers some relief at the pump, as the average price of regular gas fell 36 cents in October to end the month at $3.60 per gallon, its lowest level since March.

As always, don’t hesitate to contact us if you have any questions about what impact, if any, this may have on your financial plan.

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Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk.

The economic forecasts set forth in this material may not develop as predicted, and there can be no guarantee that strategies promoted will be successful.

Monthly Market Recap – October 2023

“If I could turn back time”— Cher