Better than expected economic data last week — including the strongest quarterly gross domestic product (GDP) report since 2021 — failed to stem the recent downturn in equity markets.1 Disappointing earnings results from Alphabet helped to send the S&P 500 Index and Nasdaq 100 into correction territory — down more than 10% since the July highs.2,3
In another sign of increasing risks for financial assets, the KBW Bank Index — representing the largest money center and regional banks — closed the week at the lowest level since September 2020.4 Investors fear more pain to come from increasing credit losses and “higher for longer” interest rates. Jamie Dimon’s decision to begin selling a portion of his holdings of JP Morgan for the first time clearly did not help sentiment.
This week’s Federal Reserve (Fed) rate decision is almost certain to mark a second consecutive meeting to hold interest rates steady. Fed officials continue to emphasize a desire to take a “wait-and-see” approach to additional monetary tightening. Recent changes in the slope of the yield curve suggest a Fed pivot may be closer than monetary policymakers expect. The long-running yield curve inversion is finally showing signs of reversing course — the 2-year Treasury note yield moved below the long bond yield for the first time since August 2022.
Investors will also have a lot of economic data to digest this week, with a number of important labor market indicators taking center stage. The employment cost index will be released on Tuesday, Job Openings and Labor Turnover Survey (JOLTS) on Wednesday and the October employment report on Friday.5 The pace of hiring in October is expected to slow to 190,000, with the unemployment rate holding steady at 3.8%.6
Sources:
1Reuters – US economy delivers blockbuster performance in third quarter; 10/26/23
2CNBC – Stock futures rebound to start a big week with the S&P 500 mired in a correction; 10/30/23
3Nasdaq – Nasdaq Index, Dow Jones, S&P 500 News: Tech Stocks Enter Correction Zone Ahead of Amazon Earnings; 10/26/23
4Bloomberg – Bank Stocks Sink Past SVB Crisis Lows as Rates Upend Business; 10/27/23
5MarketWatch – U.S. Economic Calendar; as of 10/30/23
6The Economic Times – US job growth expected to cool as the Fed looks to pause again; 10/29/23
< Go to Monday Morning Perspectives
This blog post is for informational use only. The views expressed are those of the author(s), and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client. Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.
Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice. The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete. Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements. Actual results may differ significantly. Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.
High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.
All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.
