I can’t believe I’m writing this, but we are in the final quarter of the year! I’m glad for the cooler weather that came over the weekend, but I will miss the long summer days.
Investors are probably glad that September is over, though. The stock market, as measured by the S&P 500, had its biggest pullback of 2023 last month, losing nearly 5%. Most stock sectors were down, although oil and gas did well on the nearly 9% rise in oil prices…I’m sure you noticed at the gas pump. The major shift was that strategists went from the early summer mindset –that the economy would not suffer a recession–to a new mindset that the economy was bound to have a major slowdown and possibly even a recession. That shift led some investors to trim their stock positions, driving prices lower.
To add to the pain, bond prices also did poorly last month. When bond prices go down, interest rates go up. This was evident in the rates on mortgages. As of October 5, the average 30-year mortgage rate was 7.49%, up from a low of about 6% earlier this year. Interestingly, the long-term average on the 30-year mortgage is 7.74%, so although rates have skyrocketed, they are still below average. For new home buyers, though, it means that a purchase may be less attainable than it was a couple of years ago when interest rates were at rock bottom levels. If interest rates stay this high, it could certainly put a lid on home prices, and maybe even drive them lower.
As of this writing on October 9, the S&P 500 has moved a little higher to begin October. Over the weekend, another conflict flared up in the Middle East. We are watching it, but most of the time, these events have very little intermediate or long-term impact on the stock market. You’ll often see a short-term bump higher in the price of gas, gold, and the US Dollar, but those spikes usually don’t last more than a few weeks. Unfortunately, conflict in the Middle East has been around longer than the stock market has, but fortunately, it has not had a meaningful impact on stock prices in the past.
Assuming that a major escalation of that conflict is avoided, I think that stocks are set up well for the fourth quarter. After the pullback in September, many stocks are less expensive and have more upside potential. Despite a few nasty Octobers throughout market history, the fourth quarter is often a good one for investors, so seasonality is on our side, too. As always, though, invest with your time horizon, goals, and risk tolerance in mind.
I mentioned this last month, but please don’t forget to complete your required IRA distributions. The penalties for not complying are steep. If you’re not sure if you must take a distribution, check your IRA statement. It should tell you. Generally, it’s required for people who are 73 years old or older, but may apply to you if you inherited an IRA, too. If you’re not sure, call your advisor to for help.
There are no stock market holidays in October, but it will be closed for Thanksgiving next month. The end of the year tends to get busy for us as we try to meet year-end planning deadlines, so please don’t put off your planning until the last minute.
Please enjoy your month and don’t hesitate to call if you have any questions or concerns regarding your account or the financial markets.