The Dow (-2.9%), NASDAQ (-4.2%), and S&P 500 (-3.2%) each had a bad week, as they exhibited losses every single day. Taxable and tax-free municipal bonds also lost 1% or more. Once again, the double-whammy as a direct result of inflation and the Fed’s mission of raising interest rates to combat inflation.
Last week had several favorable economic reports, as July job openings, manufacturing data, and the August non-farm payroll report all exceeded expectations. Thus, the old adage “good news is bad news”, as this raised investors’ concerns that the Fed will continue to aggressively raise interest rates, and that the Fed may not cut rates in early 2023, as previously predicted. Thus, the blood bath on Wall Street has continued since the Fed Chairman Jerome Powell made his statement the prior Friday.
I read an interesting article this morning that presented an alarming statistic. The article referenced the performance of the “typical” 60 / 40 portfolio - a mix of 60% stocks and 40% bonds – considered to be the popular strategy for long-term investors without taking undue risk. That portfolio was down over 16% through the end of August, on track for its worst year since 1936. That also confirms this is the worst investing environment I’ve ever seen except for the brief periods in late 2008 during the global financial crisis, and the 5-week period at the onset of the pandemic in 2020. We need excessive inflation to go away so we can get back on a better track for our investments.
The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.