October 2022 Market + Economic Update

SEPTEMBER RECAP

October is here! Along with cooler temperatures, colorful leaves, and spooky Halloween decorations, October also includes Financial Planning Month. If something has changed in your life and you need to make some updates to your plan, or if you’d like to get together to review your current allocations, we’d love to hear from you. If you don’t yet have a financial plan, call us to set up an appointment.

We saw a lot of turbulence in September…not just in the financial markets but also with the weather. Hurricane Ian delivered a knock out punch to Florida with heavy rains, high winds, and historic flooding. Search and rescue efforts are still underway, and our hearts go out to all those who were impacted. If you would like to donate in support of relief efforts, here is the Red Cross donation page.

Regarding financial turbulence, September is historically a bad month for investors. Over the years, the S&P 500 has averaged a 1% September downturn, but it fell by more than 9% this September. OUCH. That makes it the worst September since 2002 when it fell by 11%. By the end of September, a;l three major indexes were solidly in bear market territory (meaning they had fallen more than 20% each from their highs). Pretty much everyone is feeling like the best thing to do with money is to stuff it under the proverbial mattress.

But, the worst thing you can do is panic sell, which locks in the loss. From a strategic perspective, many talking heads say now is a great time to invest in the markets, assuming you have extra money to spend and you’re planning to invest for the long-term. You know the old adage, “buy low, sell high.” When markets are down, that presents an opportunity to buy when prices are low.

As always, we’re here to help. Just give us a call if you want to chat about your future goals, investment options, or current economic conditions.

MARKET COMMENTARY

Stocks

During the third quarter, markets wrestled with the dual possibilities of a soft landing or a recessionary outcome as a result of the Federal Reserve (Fed) rate hikes. Ultimately, recessionary fears won out and markets sold off sharply. While September is historically the worst month for stock performance, this September was especially bad; it was the worst September since 2002, when the S&P 500 fell by more than 11%

Sector Performance

Regarding sector performance, there was no “winner” during the third quarter. This was simply a game of who was the best of the bad performers. Despite being in the bottom three year-to-date, Consumer Discretionary stocks were the strongest for the month, losing “only” -8.35% and outperforming relative to other sectors. Communication Services stocks were hit the hardest, as fear of job cuts due to cost cutting efforts spurred a large sell off within the sector.

Bonds

The Federal Reserve (Fed) decided to raise the Federal Funds Target Rate (ed funds) by 0.75%. The target band now stands at 3.00-3.25%. The market now reflects a high probability of another 0.75% increase at the next meeting (November 2) and another 0.50% for the final Fed meeting of 2022 (December 14). As a result of a more aggressive Fed, we have witnessed treasury yields climb throughout the quarter. The yield on the 10-year treasury currently sits at 3.82% and climbed above 4% for the first time in more than a decade during the last week of the quarter. The yield on the 2-year Treasury is 4.27%, trading around levels not seen since 2007. With such a rapid rise in yields, it should come as no surprise that the Bloomberg U.S. Aggregate Bond Index settled down -4.32% for the month and is currently down -14.61% for the year.

ECONOMIC UPDATE

The Federal Reserve has been at the forefront of the global campaign to slow economic growth and curtail job markets just enough to undercut inflation, but not so much that it causes a recession. More data arrived Friday to suggest the Fed will keep its foot firmly on the brakes on the economy, raising concerns about the risk of potentially causing a downturn. Home buyers are particularly feeling the pain of rate hikes. For house hunters, home buying is getting more expensive, with the average rate on a 30-year fixed-rate mortgage recently hitting 6.7%, basically double what it was in January.

News | October 13, 2022 | WMBC

Index Definitions

Dow Jones Industrial Average: The Dow Jones Industrial Average® (The Dow®), is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.

Dow Jones U.S. Real Estate Total Return Index: The index is designed to track the performance of real estate investment trusts (REIT) and other companies that invest directly or indirectly in real estate through development, management, or ownership, including property agencies.

NASDAQ Composite: The NASDAQ Composite is a market-cap weighted index of all issues listed on the Nasdaq stock exchange. It is heavily weighted towards the technology sector.

S&P 500 Bond Index: The S&P 500® Bond Index is designed to be a corporate- bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap U.S. equities. Market value-weighted, the index seeks to measure the performance of U.S. corporate debt issued by constituents in the iconic S&P 500.

S&P 500 Consumer Discretionary: The S&P 500® Consumer Discretionary comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer discretionary sector.

S&P 500 Consumer Staples: The S&P 500® Consumer Staples comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer staples sector.

S&P 500 Energy: The S&P 500® Energy comprises those companies included in the S&P 500 that are classified as members of the GICS® energy sector.

S&P 500 Financials: The S&P 500® Financials comprises those companies included in the S&P 500 that are classified as members of the GICS® financials sector.

S&P 500 Index: The S&P 500® index is a market-cap weighted index of the largest 500 companies headquartered in the United States. The index covers approximately 80% of available market capitalization.

S&P 500 Utilities: The S&P 500® Utilities comprises those companies included in the S&P 500 that are classified as members of the GICS® utilities sector.

S&P U.S. Aggregate Bond Index: The S&P U.S. Aggregate Bond Index is designed to measure the performance of publicly issued U.S. dollar denominated investment- grade debt. The index is part of the S&P AggregateTM Bond Index family and includes U.S. treasuries, quasi-governments, corporates, taxable municipal bonds, foreign agency, supranational, federal agency, and non-U.S. debentures, covered bonds, and residential mortgage pass-throughs.

S&P U.S. Treasury Bond Index: The S&P U.S. Treasury Bond Index is a broad, comprehensive, market-value weighted index that seeks to measure the performance of the U.S. Treasury Bond market.

Economic Definitions

Consumer Prices – CPI: Consumer prices (CPI) are a measure of prices paid by consumers for a market basket of consumer goods and services. The yearly (or monthly) growth rates represent the inflation rate.

PCE (headline and core): PCE deflators (or personal consumption expenditure deflators) track overall price changes for goods and services purchased by consumers. Deflators are calculated by dividing the appropriate nominal series by the corresponding real series and multiplying by 100.

Disclosures

PLEASE NOTE: When you link to any of the websites displayed within this email, you are leaving this email and assume total responsibility and risk for your use of the website you are linking to. We make no representation as to the completeness or accuracy of any information provided at these websites.

A portion of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.

Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. Past performance cannot guarantee future results.

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect again loss. In general, the bond market is volatile; bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer-term securities. Any fixed-income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Vehicles that invest in lower-rated debt securities (commonly referred to as junk bonds or high-yield bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. International investing involves special risks not present with U.S. investments due to factors such as increased volatility, currency fluctuation, and differences in auditing and other financial standards. These risks can be accentuated in emerging markets.

The statements provided herein are based solely on the opinions of the Advisor Group Research Team and are being provided for general information purposes only. Neither the information nor any opinion expressed constitutes an offer or a solicitation to buy or sell any securities or other financial instruments. Any opinions provided herein should not be relied upon for investment decisions and may differ from those of other departments or divisions of Advisor Group or its affiliates.

Certain information may be based on information received from sources the Advisor Group Research Team considers reliable; however, the accuracy and completeness of such information cannot be guaranteed. Certain statements contained herein may constitute “projections,” “forecasts” and other “forward-looking statements” which do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial information. Any opinions, projections, forecasts and forward-looking statements presented herein reflect the judgment of the Advisor Group Research Team only as of the date of this document and are subject to change without notice. Advisor Group has no obligation to provide updates or changes to these opinions, projections, forecasts and forward- looking statements. Advisor Group is not soliciting or recommending any action based on any information in this document.

Securities and investment advisory services are offered through the firms: FSC Securities Corporation, Royal Alliance Associates, Inc., SagePoint Financial, Inc., Triad Advisors, LLC, and Woodbury Financial Services, Inc., broker-dealers, registered investment advisers, and members of FINRA and SIPC. Securities are offered through Securities America, Inc., a broker-dealer and member of FINRA and SIPC. Advisory services are offered through Arbor Point Advisors, LLC, Ladenburg Thalmann Asset Management, Inc., Securities America Advisors, Inc., and Triad Hybrid Solutions, LLC, registered investment advisers. Advisory programs offered by FSC Securities Corporation, Royal Alliance Associates, Inc., SagePoint Financial, Inc., and Woodbury Financial Services, Inc., are sponsored by VISION2020 Wealth Management Corp., an affiliated registered investment adviser. Advisor Group, Inc. is an affiliate of these firms.

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