WEEKLY MARKET UPDATE

October started on weak footing as interest rates continued to rise but the S&P 500 was able to break a four-week losing streak as stocks rallied over 1% on Friday, their best day since August, after a blowout jobs report for September and the recent surge in interest rates slowed.  Last week, we highlighted encouraging seasonal trends for stocks in the fourth quarter while noting headwinds from rates and energy, but markets have justifiably become captivated by interest rates, and we expect markets to continue to take their cues from bond yields until they show sustained signs of stabilization.  However, energy prices, which had steadily risen throughout August and September, notably collapsed this week with gasoline (RBOB gas) down over 20% and oil (WTI crude) down over 10% from their 2023 highs registered just last month.

Heading into next week investors still have good reason to be cautiously optimistic.  While the +5% pullback for the S&P 500 since the end of July has been painful, the S&P 500 tested a strong level of support today around 4,200 and it held before stocks rallied into Friday’s market close.  In addition, while the direction of interest rates will weigh heavily on investor sentiment, bond markets are closed on Monday due to the Columbus Day holiday while stock markets will remain open.  Also worth noting is that since 1945, October has seen more market bottoms than any other month following a +5% S&P 500 pullback (see chart below from Bespoke).  For instance, in 2022 the S&P 500 bottomed on October 12th before rallying over 7% into the end of the year.  To be clear, interest rates need to stabilize, but if we do get a respite from bond volatility, a Q4 rally is very possible.

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.