Investment categories struggle in Q3 despite generally positive 2023

October 5, 2023

During the last three months, many investment categories have struggled. If we look at common categories, we see that only money markets and commodities posted positive returns. Several factors played into this result including:

  • The sense that interest rates may be higher for longer.
  • Some sticky or “structural inflation” at the 3% to 4% level.
  • Stock values likely got ahead of themselves.

When we step back and look at the whole year, results are generally positive, but mixed:

  • Large U.S. Stocks (S&P 500)                                              +13%
  • Small/mid U.S. Stocks (Russell 2000)                                +3%
  • U.S. Quality Bonds (Bloomberg Aggregate)                      -1%
  • International Developed Countries (MSCI EAFE)             +8%
  • International Emerging Markets (MSCI EM)                     +2%

Outlook:  It is natural for stocks to get ahead of themselves then “cool off.”  I also believe we are seeing a “reality check” in terms of future interest rates and inflation. That said, when the Federal Reserve Board (The Fed) does finally stop raising rates, we may well see a “pop” in stock values.

We also believe that bonds are likely to do well over the next several years. Bond coupon rates are running an attractive 4% to 7% (depending on bond type), and if and when The Fed does eventually cut rates, bonds may increase 10% for every 1% cut.1

Of Interest:  The Japanese stock market is producing attractive results after many years of more modest returns.  The Nikkei 225 (sometimes called the Japanese Dow Jones) is up 26% this year.  As suitable, you’ll soon see us increasing the weighting of this stock market in your portfolio.

I just did a cruise down the Rhine River, taking me through Germany and France. I was excited to see the number of solar panels on homes and community buildings – in some locales, perhaps every 5th one.  Of course, with the Russian oil embargo, Europe’s motivation to increase renewable energy has increased.

If you like River Cruises, I do highly recommend the Rhine. There was so much to see from castles to cathedrals to historic towns.  And, with France on one side of the river and Germany on the other, the communities along the river have had to switch allegience between those two sides several times, creating a fascinating history and culture.

Please let me know your questions and comments. It is always a pleasure to hear from you.

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The foregoing content reflects the opinions of Laurel Wealth Planning LLC and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful or that markets will act or react as they have in the past. 

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