2023 Quarter 3 Market Update

3rd Quarter Returns:

S&P 500 (VOO): -3.40%

Small Cap (VB): -4.93%

International (VXUS): -4.45%

Fixed Income (BND): -2.71% 

The 3rd quarter continued a familiar story: strong corporate earnings, low unemployment, steady job growth, tight labor markets, and as fed officials put it, an economy experiencing ‘too much of a good thing.’ The Fed’s concern is long-term inflation, and higher interest rates are their best weapon to fight that. In my opinion, the Fed is doing the right thing, and they’re doing it with transparency. An economy that runs too hot for too long leads to runaway inflation and a potential deeper recession in the future. The decisions being made now are protecting a long-term stable economy. As interest rates have spiked, the investment environment for conservative assets has become more attractive. Since 2008, there’s been very little return for conservative investments, and we’ve recommended a heavier weight towards dividend-paying stocks accordingly. While we’ve benefitted from strong equity growth since 2009, we’re now addressing all portfolio allocations based on the current environment. The chart below compares the 3-month treasury yield (conservative assets) to the S&P 500 dividend rate back to 1946. For the first time in 15 years, conservative investments are paying investors what they should be paying.