CWS Market Review – September 29, 2023
“Given a 10% chance of a 100 times payoff, you should take that bet every time.” – Jeff Bezos
Today is the final trading day of Q3. For the most part, Q3 has been the story of two markets: a bullish one through July and a bearish once since then. Earlier this week, the S&P 500 dropped to its lowest close since June 7. This is merely my impression, but investors seem unusually pessimistic at the moment.
One of the major concerns for investors is rising interest rates. On Wednesday, the yield on the 10-year Treasury closed at a 16-year high of 5.61%. In six months, the yield has increased by 130 basis points. Apparently, the market believes that despite cooling off some, inflation is not going away. That may be right.
This week, the price for oil broke above $95 per barrel. That’s the highest price in more than a year. During the summer, oil was going for less than $70 per barrel. Higher gasoline acts like a regressive tax. It siphons money out of consumers’ pockets and it’s hardest on the poor. Exxon, by the way, just hit a new 52-week high.
Consumers are also worried about higher mortgage rates and an uncertain outlook for the economy. The rate on a 30-year fixed mortgage is now at 7.41%. That’s a three-year high. Including all the costs, housing is the least affordable it’s been in decades.
On top of that, there are concerns of yet another government shutdown. It could happen as early as this weekend. Plus, there’s a UAW strike.
Many conservative stocks have been particularly weak. Hershey, for example, touched a new 52-week low. So have many high-yielding utility stocks. The Magnificent Seven (Microsoft, Meta, Apple, Amazon, Alphabet, Tesla and Nvidia), which powered the market higher this year, have been floundering recently.
This is an odd and scary market. Never fear. I’ll try to sort it out for you. In this week’s issue, we’ll look closer at the outlook for the economy and the stock market. I also have some Buy List updates for you. But first, let’s look at what has everyone so concerned.