Facing the headwind of higher interest rates, both domestic and international stocks generally posted slightly negative returns in the third quarter of 2023. Medium and longer maturity bonds fared poorly in the quarter too as investors began to accept the prospect of elevated interest rates for longer.
In our link below, while Table 1 shows the general benchmark returns, Table 2 is notable for the dispersion in equity sector returns. With oil prices rising, the S&P 500 Energy sector led the quarter with a 12% return while the rest of the sectors were down single digits.
Looking ahead, there are four main factors to consider in the short run. A US Federal Reserve that may increase interest rates further, higher oil prices, a government shutdown and consumer spending amidst a restart of student loan repayments.
For 2024, we are also considering estimates for Real GDP growth, Corporate Earnings and Valuations. Much of this data depends on how long the Federal Reserve keeps interest rates elevated and if we avoid a severe recession.
We close with a quote from Peter Lynch, the former manager of the Fidelity Magellan fund:
“People who succeed in the stock market accept periodic losses, setbacks, and unexpected outcomes. Market drops do not scare them out of stocks.”
As always, we thank you for your confidence in Pointe Capital Management.
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Your Pointe Capital Management Team