Invest in Strength Quarterly Update 10/6/23
The third quarter of 2023 is officially in the record books, and it was a bumpy ride for US stocks. The S&P 500 got off to strong a start, gaining 3% in July. Equities stumbled in August, however, and the S&P recorded its first monthly loss since February. September lived up to its reputation as one of the worst months for stocks as the S&P’s slide accelerated and the index finished the month down nearly 5%.
One of the few bright spots for US equities was energy as the S&P 500 Energy Sector Index gained more than 10% in Q3, aided by a strong rally in crude oil. Communication services was the only other sector to post a gain for the quarter. Energy moved into third place in the sector rankings of our Dynamic Asset Level Investing (DALI) tool. DALI provides us with a heat map of where relative strength (and weakness) resides across and within asset classes. Technology continues to lead the sector rankings, despite a lackluster third quarter that the saw sector lag the broader market.
The MSCI Emerging Markets Index and the MSCI EAFE Index, which comprises developed international markets, declined 3.7% and 4.7% respectively in Q3. The strengthening of the dollar was a headwind for international equities as the US Dollar Index gained more than 3% during the quarter.
The US Treasury 10-year Yield Index crossed above 4.5% for the first time since 2007 as US Treasury yields rose significantly in Q3. The statement of economic projections released following the Federal Reserve’s September meeting showed that officials had raised their projections for the federal funds rate in 2024 and 2025, helping to fuel the surge in yields. The Bloomberg US Aggregate Bond Index finished the quarter down more than 3% as rising rates pushed bond prices lower.
The S&P GSCI Commodities Index gained more than 12% as commodities rebounded sharply in Q3. The rally was led by crude oil which gained more than 25%. Gold and silver finished the quarter in the red, however, as rising yields were a headwind for precious metals.
As we head into the final stretch of the year, the market is on rockier footing than it was at the end of the second quarter. However, we continue to see relative strength from US equities which rank first in the DALI asset class rankings. As always, we continue to monitor closely for any shifts in the market landscape.
James S. Gibbons CPFA
Alpha Pointe Capital-Founder/Wealth Manager
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