Last week, the markets kicked off October with a very strong day Friday, which helped pare back losses, as the Dow (-1.4%), NASDAQ (-3.2%), and S&P 500 (-2.2%) finished down for the week. Taxable and tax-free municipal bonds came off their lows from earlier in the week to finish with small gains, up to 0.2%.
For the month of September, US stocks lost about 4% - 5% to record the worst month since March 2020, and taxable and tax-free municipal bonds also lost about 1% for the month. These losses from September were large enough to offset gains from the first two months of the quarter. Fortunately, we are holding onto strong gains for the year. Investors should be receiving their September account statements soon, and can expect to see a drop in value of about 2% - 4%, depending on their level of portfolio risk.
There was a big tug of war match between headlines and economic news last week, with the headlines taking control. Earlier in the week, there were significant concerns about reaching the Federal debt limit, and causing a government shutdown. Once those fears were eliminated, the markets bounced back on Friday, but not enough to erase the losses from earlier in the week. Meanwhile, there was a mixed bag of economic data. On the weaker side, unemployment claims rose for the third straight week, and an inflation indicator (PCE) was the highest since 1991. On a more positive note, consumer spending rose in August, and 2nd quarter GDP was revised higher. Also on Friday, there was a report of a major pharmaceutical firm developing a drug that could effectively treat COVID patients. Remember I said the next couple weeks could be volatile. Here we are!
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