Market Commentary 09/11/23

The S&P 500 traded lower during the first half of August, at one point erasing all of July’s 3.3% gain. The sell-off occurred as investors worried about the potential for further interest rate hikes and increased bond issuance by the Treasury to fund government spending.

Interest rates rose to levels last seen in 2007, with the 10-year Treasury yield climbing to 4.35%. This increase in rates caught investors by surprise, leading to compressed stock market valuations. However, interest rates reversed a portion of their rise in late August, with the 10-year Treasury declining to 4.09%. The S&P 500 found its footing as yields declined and recovered somewhat to finish the month with a 1.6% decline, its first monthly loss since February of this year.

As we closed August, two pieces of data contributed to the decline in rates and the corresponding rebound in equity prices.

First, the number of U.S. job openings fell below 9 million for the first time since March 2021, in addition to fewer employees voluntarily quitting their jobs. The declines in job openings and quits may suggest the tight labor market is improving and may help ease wage inflation.

Second, consumer sentiment weakened to a 3-month low in August due to higher borrowing costs and concerns about lingering inflation. Investors interpreted the labor market data and weak consumer sentiment as an indication that the Federal Reserve is making progress in its battle against inflation and may not need to raise interest rates further. Recall that over the past 12 months, the inflation rate has declined from over 8% to 3.2% in July 2023. We maintain a cautious view of this decline, especially as we see the price of oil up over 20% in the past 2 months.

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 8/2/2023.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.

Additional information is available upon request. PM-03072025-5933501.1.1

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