WEEKLY MARKET UPDATE

The Federal Reserve opted to hold interest rates steady at 22-year highs this week, but despite Fed Chair Jerome Powell striking a cautious tone and using the phrase “proceed carefully” six times during his meeting announcements press conference, markets traded lower as interest rates continue to rise and the mega cap tech names that have been notable outperformers this year have recently stumbled.  However, as we highlighted last week, the second half of September is notoriously challenging, so this week’s worst weekly return for the S&P 500 since March is very consistent with seasonal trends.

Next week we anticipate higher than usual headline risk as a government shutdown looms and the UAW strikes appear likely to expand.  In addition, on Friday the personal consumption expenditures (PCE) report for August will be released and this data will be closely scrutinized, as it is one of the Fed’s preferred inflation gauges.  However, we wanted to focus on the government shutdown, because while market volatility will likely coincide with brinksmanship on the Hill, the longer-term track record for stocks following government shutdowns is surprisingly optimistic (see table below).  Per data from Carson Investment Research, since 1976 there have been twenty-one shutdowns and on average the S&P 500 is over 12% higher twelve months later.

Ian G. Browning, CFA
Managing Director, Investment Strategies | Shareholder

Thanks to our clients and friends who have referred business to us over the years.

Your endorsement has been the cornerstone of our growth and our greatest compliment.