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Equities Slip as Yields Surge
Equity markets slipped last week, breaking six consecutive weeks of gains as treasury rates rose. Global equities (represented by the MSCI All Country World Index) were down -1.30% while domestic stocks (represented by the S&P 500 Index) were down -0.96%.
US Treasury Yields
In a relatively light week for economic data releases, movement in US Treasury yields seemed to dominate headlines. With the 2- and 10-year Treasury rates ending the previous week at 3.95% and 4.08% respectively, each surged last week to levels of 4.11% and 4.25%. Rates have been volatile as the market continues to mold expectations for the Fed’s rate-cutting cycle. Since the Fed’s first rate cut in September, economic data releases have provided positive surprises with a labor market update for September showing strong jobs additions and a tick down in the unemployment rate as well as strong retail sales growth.
Q3 Earnings
Earnings season for the third quarter continued as roughly 37% of S&P 500 companies released results with a blended growth rate of 3.6%. According to FactSet, analysts expect the Magnificent Seven stocks to drive an average of 18.1% third-quarter growth while the remaining 493 companies were projected growth of just 0.1%.
Real Estate Market
The US real estate market continued its slump in September. Existing home sales fell 1.0% for the month according to the National Association of Realtors. With the recent volatility in rates, the average 30-year mortgage rate also rose to 6.54% after falling to its lowest level in 2 years reaching 6.08% in late September.
Looking Forward
This week is busy with economic data releases as the US government releases its initial estimate of Q3 GDP, the September reading of the Fed’s preferred inflation gauge in the Personal Consumption Expenditures (PCE) Price Index, and the US jobs report for October. The US economy is expected to have grown at a 3.0% pace in Q3, similar to the quarter prior, but October’s jobs gains are expected to be nearly half the amount as September’s strong 254,000 addition.
I’d like to leave you with the final line we’ve used since we started these commentaries back at the very height of market volatility in March 2020. Always remember that we create financial/investment plans not for the easy times, but to prepare for the tough ones.
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