CIO Monthly Observations - September 2023
Markets in Review
Stock markets fell in August, giving up ground, with the S&P 500 dropping -1.8% and reducing its year-to-date gains to 17.4%. The MSCI All Country World index also fell, down -3.0% for the month, which puts its year-to- date return at 13.3%. Bonds also dropped with the Bloomberg BarCap U.S. Aggregate Bond index losing -0.6% in August, which leaves its year-to-date return at only 1.4%.
Most of the Fed governors and Chairman Powell met at their annual gathering in Jackson Hole, WY to talk about the US consumer, future interest rate policy and other regulatory and economic topics. Although the chairman’s speech had some investors on edge, robust tech earnings – especially from the chips sector – helped to reduce some of the market’s losses. Meanwhile, overseas, China’s economy continues to struggle, which has weighed on global economic growth this year.
The Federal Reserve chairman suggested that more rate hikes may be necessary Tech shares recovered some of their monthly losses because of demand for AI chips China’s economy continues to weaken
News in Review
The Fed Chairman’s speech talked about the strength of the US economy and concerns that he and other Fed governors have that inflation will remain elevated as long as the economy remains resilient in the face of ever higher interest rates. However, he did say that the Fed would “proceed carefully,” which likely means that they may pause again in September and not raise interest rates immediately, but he still left the door open for further rate increases later this year.
The S&P 500 dropped four days in a row heading into some influential tech earnings reports, but the positive news from some of the biggest chipmakers on the planet reversed the downward trend. One of the companies saw their stock jump 8% in a day and that helped the entire Nasdaq index to increase by 1.5%, stopping the pullback in its tracks.
China’s economy had been expected to be a growth engine this year – now that they have removed most of their Covid restrictions – but so far it has been underwhelming. Home prices on average fell in the country for the first time in July and an index of the 35 smallest cities in China saw housing prices decline for a 17th straight month. The surprising weakness led many observers to predict that the government will begin taking steps to ease policy in order to contain the weakness in the property sector.
One woman whose name is a combination of the two biggest movies of the year – and a surprising cultural phenomenon known as “Barbenheimer” – has been enjoying the attention that comes with movie-goers enjoying both “Barbie” and “Oppenheimer” in the theaters. The Massachusetts woman has been hearing from college friends and those that know her unique name and was unable to pick a favorite when asked to pick which movie she liked better.