August 14, 2023 •Nathan Willis
Key Events: Downgrade: USA ✔️ Banks ✔️ Consumer ⚪
Following the downgrade of the USA to AA+, from AAA, Moody’s downgraded 10 banks and promised more.
China’s recovery appeared to stall as consumer prices slipped into deflation. Analysts say Chinese regulators have attempted to limit negative economic reporting.
Atlanta is bracing for chaos as a fourth indictment of Donald Trump is set to be unveiled.
Market Review: An edgy earnings season
Stocks’ reaction to the current earnings season reflected an edgy market; companies that beat estimates were rewarded less than normal while companies that missed were punished more than average.[1]
Both stocks and bonds were down slightly during a quiet summer week. Growth lost more money than value, and small caps fell more than large stocks.
Outlook: Checking in with the consumer
We have talked about three primary areas of concern:
- Bank lending standards while companies are asking for fewer loans.[2]
- Leading economic indicators are consistent with recessionary periods.[3]
- Leading economic indicators are consistent with recessionary periods.[4]
This week we’ll touch the ominous sign visible in the mortgage market. As can be seen below, average mortgage payments for new mortgages are more than 70% higher - $2,600 vs $1,500 per month – than in the months emerging from the pandemic. This is likely to put pressure on the consumer and the economy as a whole.
OneAscent portfolios remain fully invested in a broadly diversified portfolio, in areas where we find attractive value despite the clouds on the horizon.
Foreshadowing a weaker consumer[5]
Navigator Outlook: August 2023
This material is intended to be educational in nature,[6] and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client. These materials are not intended as any form of substitute for individualized investment advice. The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own. Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. OneAscent can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.
[1] Source: JPMorgan research
[2] Source: Federal Reserve Senior Loan Officer Opinion Survey on bank lending practices The Fed - Senior Loan Officer Opinion Survey on Bank Lending Practices (federalreserve.gov)
[3] Source: Conference board (federalreserve.gov)
[4] Source: Bloomberg
[5] Source: Redfin Housing Market Update: The Typical U.S. Homebuyer’s Monthly Payment Is Up Nearly 20% From a Year Ago (redfin.com)
[6] Source: Market Returns reference the following indices: Large Cap – S&P 500, Mid Cap Growth – Russell Midcap growth, Mid Cap Value – Russell Midcap Value, Small Cap – Russell 2000, Developed – MSCI EAFE, Emerging – MSCI Emerging Markets, Aggretate – Bloomberg US Aggregate, High Yield – Bloomberg High Yield
OAI00407