October 23, 2023 •Nathan Willis
Key Events: Proceeding Carefully
“Proceeding carefully” is the description used by Fed Chair Powell this week, describing the Fed’s current approach. The Fed is committed to bringing down inflation and acknowledges that the outlook remains uncertain.
President Biden reiterated the United States’ support of Israel, as well Ukraine, Taiwan, and the southern border. Middle East tensions remain high.
Market Review: Flight to quality
Most investments lost money this week; US and International stocks and most sectors of the bond market were down.
The only S&P 500 sectors with positive returns were consumer staples (a ‘risk-off’ sector) and energy. The Middle East conflict drove oil and precious metals higher as well.
Outlook: Crosscurrents lead to uncertainty
Earnings and economic data continue to be strong, but indicators that we trust–such as housing affordability, as seen below–indicate that a recession may be coming, and sooner rather than later. The consumer is responsible for more than 2/3 of US economic spending,[1]and reduced mortgage affordability means less money to spend elsewhere.
As we begin to look toward 2024, we believe investors would be well served to follow the Fed’s lead by proceeding carefully with their allocations; maintain discipline and stick with your plan. OneAscent continues to be focused on diversification, maintaining exposure to areas of the stock market where valuations give us a greater margin of safety.
Housing becomes less affordable, pressuring consumer finances[2]
Navigator Outlook: October 2023
This material is intended to be educational in nature,[3] 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: Bureau of Economic Analysis gdp2q23_3rd.pdf (bea.gov)
[2] Source: Redfin A Homebuyer Needs to Earn $115,000 to Afford the Typical U.S. Home, More Than Ever Before (redfin.com)
[3] 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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