WEEKLY MARKET UPDATE

For the first time since 2007, the yield on the 10-year US Treasury briefly hit 5% on Thursday and with markets hyper focused on interest rates, stocks and bonds finished the week lower.  Geopolitics and brinksmanship in DC are also looming, so the week’s market action was hallmarked by a flight to safety to gold (classic risk off asset), oil (Middle East tensions hedge), and cryptocurrency (ETF optimism). 

Underpinning some of the recent strength in interest rates, retail sales for September shrugged off concerns about the return of student loan repayments and crushed expectations while weekly jobless claims fell below 200K for the first time since January.  As a result, the soft economic landing narrative gained momentum and the Atlanta Fed’s GDPNow measure, a real-time forecast for quarterly GDP, has risen to 5.4% for the third quarter, which if accurate, would be the highest GDP reading since 2021.  In addition, multiple Fed members including Fed Chair Jerome Powell on Thursday have reiterated an intention to keep interest rates higher for longer, so markets have steadily repriced interest rates higher, particularly on the longer end of the yield curve (i.e., 10 and 30-year US Treasuries).  

Third quarter earnings, on the other hand, have largely been ignored.  The season is still in its infancy with about 17% of S&P 500 companies having reported, but a strong start faded into the latter half of the week and earnings are now on pace to contract by about -0.7% year-over-year in Q3 (per FactSet).  Markets will continue to key on interest rates, but next week earnings season heats up with Google (Alphabet) and Microsoft on Tuesday, Facebook (Meta) on Wednesday, and Amazon on Thursday.

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

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WEEKLY MARKET UPDATE