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September 2023 Market Commentary: Walking the Economic Tightrope

August Recap and September Outlook

As we approach the final quarter of 2023, we find ourselves walking a tightrope of economic uncertainties and surprises. The summer brought a series of positive data releases, painting an upbeat picture of the economy, a scenario that seemed to defy the consistent messaging from the Federal Reserve

In August, people started feeling less positive about the economy. This happened because Jerome Powell, the Chair of the Federal Reserve, gave a speech where he hinted that they are planning to keep a tight grip on the country's money policy.

But this didn't shock many people. In fact, a lot of people believe that because shoppers are still spending a lot, the government won't change its plans anytime soon.

Also, the rate of inflation, which is how much the price of things goes up, stayed the same in July as it was in June, at 3.2%.

So, is it bad news that the economy is doing well? It really depends on how you look at it.

What is the Data Saying?

Prices are not going up as fast as before, and the big goal is to have them increase by only about 2% a year. The country's total income, known as GDP, is stable, growing at a rate of 2.1%. Also, finding a job might become a bit harder compared to the past few years when lots of people were getting hired.

The good news is, we're not heading towards a big economic downturn. In fact, the economy is doing okay and growing slowly but steadily. This is what Jerome Powell, the head of the U.S. central bank, has been hoping for. Even though people doubted him, especially about his thoughts on price increases being temporary, it seems he was onto something. As we moved through the year, we saw that people continued to buy things, and the fast rise in prices started to slow down, partly because the bank increased interest rates.

But there's a worry that Powell might keep the interest rates high for a long time to make sure prices don't shoot up again. This could mean companies make less money, and people might have to pay more for home loans.

A big question now is, can people keep spending money to help the economy? If prices go up faster than wages, it could be a problem. Right now, many are spending rather than saving, which might lead to issues down the road.

Also, usually when prices go up slower, fewer people have jobs. This is known as the "sacrifice ratio." Surprisingly, even though prices didn't rise quickly, not many people lost their jobs. But last month, a bit more people were without jobs compared to before. If the government wants to reduce price increases even more, it might mean even fewer jobs available.

Chart of the Month: GDP Describing a Soft Landing

GDP recovered from the two negative quarters of early 2022 and has been holding steady – with no sign of a recession. It seems like we're on a smooth path with the economy gradually stabilizing and finding its footing.

Real GDP: Percent Change from Preceding Quarter

Source: U.S. Bureau of Economic Analysis. Seasonally adjusted annual rates.

Equity Markets in July

  • The S&P 500 was down 1.77%

  • The Dow Jones Industrial Average fell 2.36%

  • The S&P Mid-Cap 400 fell 3.04%

  • The S&P Small-Cap 600 was down 4.33%

Source: S&P Global. All performance as of August 31, 2023

After going up for five months in a row, the S&P 500, which is a group of 500 large companies' stocks, had more bad days than good in August, with losses on 14 out of the 23 days the stock market was open. Ten of the eleven S&P 500 sectors were down, except for the energy sector which grew by 1.28%. The utilities sector was the one that lost the most, going down by 6.72%.

But it wasn't all bad news. When companies shared how much they earned, the results were better than what people expected. The earnings were 4.5% higher, which was surprising because people thought they would be lower. By the end of the month, almost all companies in the S&P 500 had shared their earnings, and 374 out of 496 did better than expected.

Bond Markets

The interest you can earn from a 10-year U.S. government bond went up a bit, from 3.96% to 4.11%. For the longer 30-year bond, the rate at the end of August was 4.21%.

The Bloomberg U.S. Aggregate Bond Index, which is a way to see how bonds are doing overall. In August, it went down a little, by 0.63%. But if you look at the whole year so far, it has gone up by 1.37%.

The Smart Investor

Summer is winding down, and even though it's not over yet, we're starting to notice the days getting shorter and hopefully a bit cooler. As the end of the year approaches, it's a good time to start thinking about some important stuff, like adding more to your 401(k) and figuring out your charitable donations for the year.

And just like kids getting back to school have homework to do, it's a great time for investors to do a bit of "homework" too — checking over your investments and seeing how they're doing.

But before diving into all the tasks on your to-do list, why not take a moment to just think about what you really want? Your goals are the heart of your investment plan, and it's important to check in with them regularly.

Here's what you should focus on:

  • If you’re going to have to start paying back student loans in October, it’s time to start planning. Revisit your budget, and scale back where needed. Are you eligible for a repayment plan? How about refinancing?

  • High rates are still with us. Are you taking advantage and moving cash balances into money markets or CDs?

  • Fall means we are heading towards the end of the year. Make a list of the things you need to do in 2023 for tax or savings reasons: 401(k)s or IRAs, HSAs, and charitable giving should be at the top of your list.

It's all about taking a step back and thinking about whether your plans still make sense with everything that's going on in your life. Sometimes even small changes can mean it's time to think about adjusting your plans.

Before the busy holiday season starts, review your goals and make sure you're heading in the right direction.


The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation.

This content not reviewed by FINRA

Alchemist Wealth, LLC is registered as an Investment Adviser with the State of Ohio and only provides advisory services in states where registered or otherwise exempt from registration. All information provided herein is for educational and informational purposes only and should not be viewed as investment advice. Any links to third party information or data are believed to contain accurate information at the time of publishing.


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