Markets “In a Nutshell” for September 25, 2023
Investment Week at a Glance
Stocks finished lower for the week. The Dow Jones Industrial Average fell 1.90%, the S&P 500 was down 2.90%, and the NASDAQ fell 3.60%. Foreign stocks (MSCI EAFE) were also down, falling 1.80%. Bond prices were down for the week, with the 10-year U.S. Treasury ending the week at 4.43%. (Data source: Wall Street Journal)
Fed’s Message to Markets
The Fed left rates unchanged in their September meeting last week and Jerome Powell made the message clear that the Fed will leave rates elevated until inflation moved more toward 2%. The Fed also left another rate hike on the table and adjusted the projections of rate cuts from 1% next year to 0.5% meaning higher rates for longer. This moved markets and bonds lower as yields rose sharply and stocks declined sharply for the week with the growth companies getting hit the hardest. In the long-term view, expectations are for 120 basis points in cute in 2025 and another 100 basis points in 2026 which would bring the fed funds rate to under 3% by the end of 2026. Markets have also pushed back the first rate cut to the July 2024 meeting.
The market has now fallen roughly 6% since the end of July after a strong start to the year. There are many factors that have cooled the market down as rates seem to keep rising and the Fed doesn’t plan on rate cuts in the near future. The labor market is starting to also show signs of cooling off as unemployment has begun to tick up but remains near relatively low levels. The consumer may begin to spend less as savings continue to fall and the labor market begins to tighten. Other worries for the market include a possible government shutdown and the ongoing United Auto Workers (UAW) strike which has now shut down 15% of the big 3 automakers’ production. Market volatility could continue as the market works its way through these headwinds.
What percent is the equal weight S&P 500 up for the year? (Scroll Down for Answer)
Have a Great Week!
1. 1%. The S&P 500 is a market weight index so the larger companies have a larger weight. There are funds that track the S&P 500 as if each stock had the same weighting. This index is only up 1% this year which shows how top heavy this year has been with the largest companies making the biggest gains.