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:
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By: Thomas Steffanci, PhD, Senior Portfolio Manager
The stock market (1) has reacted bullishly today to Federal Reserve Chairman Jerome Powell’s prepared remarks at the Federal Reserve Bank of Kansas City’s Economic Policy Symposium in Jackson Hole, WY. It was his first public admission of where he stood on tapering that pushed stocks higher: “At the FOMC’s recent July meeting, I was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year.” Despite Powell reiterating his Federal Open Market Committee (FOMC) meeting comments, the speech comes away as especially dovish, in saying it would be wrong to respond to temporary fluctuations in inflation and his repeated statement that “the timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of an interest rate liftoff,” added to the dovish tone.
It was a masterful performance from a Chairman whose FOMC committee members were split on the timing and speed of tapering. Without giving a specific timetable for tapering, he has bided his time to see more data on unemployment and inflation. He will get his first important data point in Thursday’s August payroll employment report.
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 web site 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 see important disclosure information here.