Q3 2023 Quarterly Market Commentary

Third Quarter 2023 Market Commentary

Stocks and bonds were both impacted by a combination of events during the third quarter, starting with an increase in oil prices, which caused inflation to re-accelerate in August. The rebound in inflation contributed to a sharp rise in interest rates, with the 10-year Treasury yield rising from 3.82% at the beginning of the quarter to 4.57% at quarter end. The rise in interest rates put pressure on the stock market, and the S&P 500 declined 3.2% during the third quarter.

Rising Oil Prices Renew Inflation Fears

After trading lower during the past year, oil prices rose to a 12-month high during the third quarter. Oil rose above $90 per barrel in September, from approximately $70 per barrel at the end of June. Demand for oil remains strong as the global economy continues to grow, while OPEC recently announced extended production cuts through the end of 2023. Additionally, the US’s Strategic Petroleum Reserve sits at its lowest level since the 1980s, which leaves little capacity to mitigate a potential supply disruption. With OPEC’s production cuts squeezing global supply, oil prices surged nearly 30% in the third quarter.

The rise in oil prices caused inflation to re-accelerate in August, with gasoline prices accounting for over half of the monthly increase. Oil’s use as a transportation fuel means that it impacts nearly every segment of the economy, and a continued rise in oil prices could keep upward pressure on inflation as rising fuel costs are passed through to the consumer. Indeed, the CPI for August 2023 of 3.7% was higher than the 3.0% reading in June 2023. Overall, inflation has fallen from the 9.1% reached in July 2022 to under 4% but getting below 3% (where the Fed has maintained as its goal) may prove to be difficult with higher oil & housing prices, and the continued strength in the labor market.

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Important Disclosures: The report herein is not a complete analysis of every material fact in respect to any company, industry or security. The opinions expressed here reflect the judgment of the author as of the date of the report and are subject to change without notice. Any market prices are only indications of market values and are subject to change. The information contained herein is based on technical and/or fundamental market analysis and may be based on data obtained from recognizable statistical services, issuer reports or communications or other sources believed to be reliable. However, such information has not been verified by us, and we do not make any representations as to its accuracy or completeness. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Index returns are not fund returns. An index is unmanaged and not available for direct investment. Past performance is no guarantee of future results. Yields are given as of 10/1/2023.Bonds are subject to price and availability.

The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index
with each stock’s weight in the Index proportionate to its market value. The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. The NASDAQ 100 Index is an unmanaged group of the 100 biggest companies listed on the NASDAQ Composite Index. The list is updated quarterly and companies on this Index are typically representative of technology-related industries, such as computer hardware and software products, telecommunications, biotechnology and retail/wholesale trade. The MSCI EAFE Index is designed to represent the performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia and the Far East, excluding the U.S. and Canada. The MSCI Emerging Markets Index is designed to represent the performance of large- and mid-cap securities in 24 Emerging Markets. Bloomberg U.S. Aggregate Bond Index is a broad-based measure of the investment grade, US dollar-denominated, fixed-rate taxable bond market.

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