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Weekly Market Update September 8, 2023 (Video)

September 09, 2023


Weekly Market Update September 8,2023
Dow Jones Industrial 34,
577+0.7%, S&P 500 4,457 -1.3%
Nasdaq Composite 13,762
 -1.9%, US Ten Year 4.26%, Crude Oil $87.28

Equity markets this week closed lower following notable declines in market heavyweights like Apple and NVIDIA.  Apple was hit due to news that China is restricting use of iPhones by government employees, and NVDIA as well as other chipmakers were weaker mostly due to interest rate concerns due to some strong economic numbers.  The standout data released this week was the ISM number that jumped to the highest level since February, and on Thursday the weekly jobless claims figure came in lower expectations.  Why does this translate into a weaker market?  Because in this environment, good news (better than expected economic figures) is bad news.

The Fed and Powell are trying to negotiate a “soft landing,” and when economic indicators come out better than expected, this bodes poorly for stocks in the short term.  This is because Powell and team will likely have to continue raising interest rates and possibly keep them elevated to ensure growth slows.  Remember the Fed’s goal in raising rates is to lower inflation – in so doing they want the economy to slow down.  Therefore, good news on the economic front is bad news for stocks.

Market forecasters over the last few months have made severe U-Turns in their predictions for the economy.  Back in March of this year, almost 70% of economists (surveyed by the National Association for Business Economics) said they see a recession at some point occurring this year or next.  Today, in a complete about face, nearly 70% of the economists from the same survey point to a “soft-landing” (no recession) for the economy.  Why is this important for stock investors?  Simply because it points out that the “smartest people in the room,” who are paid to predict economic results over the next 12-months, can’t predict what’s going to happen in the next 12-months accurately.

October 2022


July 2023



September 8, 2023


You’ve probably heard that the most accurate historical predictor of a recession happens when we have an inverted yield curve.  That happens when interest rates on short-term bonds (say 2-years or less) are HIGHER than interest rates on longer term bonds.  In fact, the “inverted yield curve” has accurately predicted all 10 recessions since 1955 (according to the Federal Reserve of San Francisco), with only one false positive in the 1960s.  The yield curve in the U.S. has been inverted since July 22.  So with the latest survey of recession vs soft-landing, economists are predicting that for the second time in over 70 years, the inverted yield curve is giving us a “false positive.”


*Source: Board of Governors of the Federal Reserve; National Bureau of Economic Resarch


What’s the point of this for investors?  Don’t focus on the predictions for next year – instead, focus on the next 10, 15 or 20 years.  For your equity investments, choose a portfolio that’s going to perform well over years and decades, not months.  Take advantage of the current interest rate environment and hedge your portfolios with short-term Treasuries that are still paying very attractive yields.  Investing is a long-term game and investors should embrace uncertainty for the short-term.  Making bets solely based on expert predictions of what’s going to happen in the next 12 months isn't intelligent investing, it's just gambling.

Have a Great Weekend,