October 16, 2023 •Nathan Willis
Key Events: War
Hamas launched a surprise attack on Israel, which is being met with a massive response. Tensions in the middle east remain high.
Disfunction continues in Washington as Republicans have failed to elect a Speaker of the House.
Market Review: Flight to quality
Tension between recession and strong earnings resulted in flat returns for Large cap stocks. Small caps’ exposure to recession resulted in losses.
Despite middle east tensions, international stocks performed well. Bonds experienced extraordinary volatility but ended the week with gains amidst a flight to quality.
Outlook: Earnings season preview
The third quarter earnings season kicks into high gear this week, and estimates have improved. The index is expected to show 0.4% earnings growth, the first quarter of year-over-year growth since the third quarter of 2022.[1].
Strong earnings are being driven by an increase in profit margins, a significant improvement from 6 quarters in a row of declining margins[2]. While this has driven stocks higher, the increase in bankruptcies highlights margin pressures, dulling our optimism for future profits.
As we begin to look towards 2024, we continue to be focused on diversification, maintaining exposure to areas of the stock market where valuations give us a greater margin of safety.
Fed hikes pushing bankruptcy filings higher[3]
Navigator Outlook: October 2023
This material is intended to be educational in nature,[4] 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: FactSet
[2] Source: FactSet
[3] Source: Apollo Investments Bankruptcies Rising Because of Fed Hikes - Apollo Academy
[4] 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
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