September 2023 - Market update

Data Dashboard

Stock Market

In September, the global stock market faced a significant setback, declining by 4.78%, although the YTD performance remained positive at 9.94%. This decline was influenced by rising global bond yields and persistent tightening measures by global central banks.

The S&P500 mirrored this global trend, registering a decline of -4.77% in September. Despite this, the index maintained a solid YTD growth of 13.06%. Concerns over a potentially more assertive stance by the Federal Reserve and negative seasonality contributed to this decline.

Within the U.S. equity landscape, Small-Cap equities suffered a substantial decline of -5.89%. Amidst these challenges, the Energy sector stood out as the only sector to remain in positive territory, posting a gain of 2.40%. This resilience is attributed to the rising oil prices.

September Monthly Returns (by US Sector)

Bond Market

The US Aggregate Bond Index faced a decline of -2.54%, experiencing pressure primarily due to a rise in longer-duration yields to multi-year highs. Several factors contributed to this scenario, including concerns over robust economic data, apprehensions about the Federal Reserve maintaining ‘higher for longer’ rates, and the belief that increasing oil prices could disrupt the anticipated downward trajectory of inflation. Furthermore, we witnessed the 10-year and 30-year treasury reaching its 15-year high.

International Government bonds experienced a 4.37% decline in September, influenced by a strengthening dollar and increasing yields. The high-yield bond sector demonstrated relative resilience in September compared to other asset classes, mitigating its decline to -1.68%. This outcome can be attributed to the asset class's shorter duration and its elevated exposure to the Energy sector, which provided a degree of protection in a rising interest rate environment.

Economics

While the Fed chose to maintain interest rates (5.25% - 5.50%) in the September meeting, they did hint at the possibility of one more rate hike by the end of the year and projected fewer rate cuts in the second half of 2024.

The four-week rolling average of jobless claims concluded the month at its lowest level since February, indicating relative stability in the labor market. The headline inflation rate accelerated for the second consecutive month, reaching 3.7% year-on-year. On the other hand, the pace of Core Consumer Price Index (CPI) decelerated further, dropping to 4.3% year-on-year and hitting its lowest level since September 2021.

Housing data exhibited unfavorable trends, with declines observed in new and existing home sales as well as housing starts. Additionally, the year-over-year pace of home prices, as indicated by the July Case Shiller 20-City Composite, remained negative for the fourth consecutive month, showing a decrease of 1.22%.

Tactical Trades

For our Tactical Equity Stocks, our sector concentration at the end of the month was primarily in Energy, Industrials, and Technology. As for Tactical Equity ETF portfolios, we swapped out of two of the eight positions this month for exposure to US Energy and Uranium Miners equities.

For our Tactical Fixed Income portfolio, there were no trades for the month of September and we remain invested in floating rates loans and ultra-short treasury bills.

General Client Considerations

Below is a table showing the change in contribution limits for 2023:

We look forward to hearing from you!

Thanks,

The Friedenthal Financial Team

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