Rising Rates Causing Pain Across All Asset Classes

The Federal Reserve continues to keep short-term interest rates high. This has helped to bring inflation down from the highs seen last year. The Fed has won the latest battle with inflation, but the war continues. The final push from 3.5% to 2% inflation is going to take time. The market is coming to grips with the understanding that rates will continue to be higher for longer. As long-term interest rates continue to rise, it is putting pressure on growth stocks.

Following a very nice July, August and September have been a little rough. We don’t expect that to continue. Seasonally, the 4th quarter tends to be positive (the Santa Claus effect). From a fundamental perspective, company earnings are projected to start expanding in the coming months. As company earnings expand, stock prices should follow.

The U.S. Government continues its dysfunction. Congress has kicked the can down the road until the middle of November for their next funding crisis. Looking back at past government shutdowns, it has been a non-event for the market. We expect that this time will be similar.

Speaking of the government, Social Security received an increase of 8.7% for 2023. Looking forward to 2024, the current projections are that Social Security will go up about 3% next year. If inflation continues to stay “under control”, you can expect similar increases going forward.

Short-term interest rates continue to pay around 5%. If you have excess funds in a checking or savings account, take action so that you can receive a fair return. Don’t assume that your bank will increase the rate that you receive. They are stuck with long-term bonds that are paying close to 0%. They cannot afford to increase your interest rate. The only way for you to get a fair rate of return is to move the money to a different account or purchase a certificate of deposit. If you need any help or advice, please give us a call.

Very truly yours,

Michael F Cantlon
Thomas E Guyett
Robert T Gephart