Monthly Market Update (September): 3 Things You Need to Know

by | Oct 3, 2022 | Wealth Management

We wrapped up September and boy was it one to remember but for all the wrong reasons. With fears of central bank over-tightening, the S&P 500 index dipped to a new 2022 low. The U.S. 10-year Treasury yield surpassed 3.8%, marking the quickest re-rating in daily yields since 2009. A 60/40 balanced portfolio of U.S. stocks and U.S. bonds is now down -20.2% year-to-date through September 30th, the worst return in nearly 35 years (the earliest we have total returns for both the S&P 500 and the Barclays Aggregate Bond Index is 1988). Maybe one positive is that everything is getting cheaper!

Here are 3 things you need to know:

  1. While the Federal Reserve has done the equivalent of 12 rate hikes of 0.25%, the bond market has already priced in 5 more.
  2. The yield-to-worst on the Bloomberg Barclays Aggregate Bond index has nearly tripled over the course of the year to 4.75%.
  3. Only ~20% of S&P 500 companies have dividend yields higher than the U.S. 10-year Treasury yield (as of 8/31/22).
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Sources:

  1. Sources: J.P. Morgan Asset Management – Economic Update; Bureau of Economic Analysis (www.bea.gov); Bureau of Labor Statistics (www.bls.gov); Federal Open Market Committee (www.federalreserve.gov); Bloomberg; FactSet; Goldman Sachs Asset Management.; John Hancock Investment Management.
  2. Indices:
    • The Bloomberg Barclays Aggregate Bond Index is a broad-based index used as a proxy for the U.S. bond market. Total return quoted.
    • The S&P 500 is designed to be a leading indicator of U.S. equities and is commonly used as a proxy for the U.S. stock market. Price return quoted.
    • The MSCI ACWI ex-US Index captures large and mid-cap representation across 22 of 23 developed market countries (excluding the U.S.) and 27 emerging market countries.  The index covers approximately 85% of the global equity opportunity set outside the U.S. Price return quoted.
    • The MSCI Emerging Markets Index captures large and mid-cap segments in 26 emerging markets. Price return quoted (USD).

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Company), will be profitable or equal any historical performance level(s). Please see important disclosure information here.

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