• Menu
  • Skip to right header navigation
  • Skip to main content
  • Skip to secondary navigation
  • Skip to primary sidebar
  • Skip to footer

Before Header

Philadelphia Wealth & Asset Management Firm

wealth management

  • Why TBA?
    • Why Tower Bridge Advisors?
    • FAQs
  • Who We Serve
    • Individuals & Families
    • Financial Advisors
    • Institutions & Consultants
    • Medical & Dental Professionals
  • People
    • Maris A. Ogg, CFA® – President
    • James M. Meyer, CFA® – Principal & CIO
    • Robert T. Whalen – Principal
    • Nicholas R. Filippo – VP, Sales & Marketing
    • Jeffrey Kachel – CFO, Principal & CTO
    • Chad M. Imgrund – Sr. Research Analyst
    • Christopher E. Gildea – Sr. Portfolio Mgr.
    • Daniel P. Rodan – Sr. Portfolio Mgr.
    • Christopher M. Crooks, CFA®, CFP® – Senior Portfolio Manager
    • Michael J. Adams – Senior Portfolio Manager
  • Wealth Management
    • How to Select the Best Wealth Management Firms
  • Process
    • Financial Planning
    • Process – Equities
    • Process – Fixed Income
  • Client Service
  • News
    • Market Commentary
  • Video
    • Economic Updates
  • Contact
    • Become A TBA Advisor
    • Ask a Financial Question
  • We are looking to add advisors to our team. Click here to learn more!
  • We are looking to add advisors to our team. Click here to learn more!
  • Click to Call: 610.260.2200
  • Send A Message
  • Why TBA?
    • Why Tower Bridge Advisors?
    • FAQs
  • Services
    • Individuals & Families
    • Financial Advisors
    • Institutions & Consultants
    • Medical & Dental Professionals
  • People
    • Maris A. Ogg, CFA®
    • James M. Meyer, CFA – Principal & CIO
    • Raymond F. Reed, CFA – Principal
    • Robert T. Whalen – Principal
    • Nicholas R. Filippo – VP, Sales & Marketing
    • Jeffrey Kachel – CFO, Principal & CTO
    • Chad M. Imgrund – Sr. Research Analyst
    • Christopher E. Gildea – Sr. Portfolio Mgr.
    • Daniel P. Rodan – Sr. Portfolio Mgr.
  • Wealth Management
  • Our Process
    • Financial Planning
    • Process: Equities
    • Process – Fixed Income
  • Client Service
  • News
    • News & Resources
    • Market Commentary
  • Videos
    • Economic Updates
  • Contact
    • Become a TBA Advisor
    • Ask a Financial Question
wealth management

September 18, 2023 – Markets are directionless, torn between better economic activity and an increase in storm clouds from labor unrest to China. What is crucial is the future trend for interest rates. Investors will parse this week’s FOMC meeting for clues, but probably won’t get a much clearer picture for their efforts.

//  by Tower Bridge Advisors

Stocks have been trading sideways in a directionless pattern for the past month. On the plus side, earnings have exceeded forecasts and the economy continues to grow at a rate faster than economists had predicted. But that has been countered by a series of concerns:

1. Interest rates, particularly at the long end of the curve, have been slowly climbing. The 10-year Treasury yield is back at highs not seen since last October and threatens to move higher.

2. China, a pillar of growth for the past several decades is slowing down as its population starts to shrink and Communist leadership grapples with near-term economic concerns stemming in part from too much debt and a slow recovery from Covid shutdowns.

3. Higher oil prices.

4. Sustained wage pressure. Although the number of new jobs per month has been trending lower, and job openings are in decline, wage rates are still rising well in excess of 4%. Worker unrest is demonstrated by increased strike activity. 2023 was already the biggest year for strikes in two decades before auto workers walked off their job last week.

5. Tech stocks have led the market for most of 2023 as optimism over the rapid growth of Generative Artificial Intelligence lifted expectations. But it appears that reality and expectations have reached a balance point. Recent earnings reports from companies like Oracle# and Nvidia#, while good, failed to lift expectations further. As a result, their share prices have stalled, at least for the moment. New leadership has yet to surface.

6. Demand for new homes had energized the overall housing market even as demand for existing homes waned. However, with mortgage rates crossing 7%, even homebuilders are starting to see resistance.

That sets the stage for this week’s FOMC meeting. The immediate outcome of the meeting isn’t in question. The Fed isn’t going to change the Fed Funds rate from a range of 5.25-5.50%. It might even be done raising rates altogether. Instead, investors will parse every written word in the post-meeting statement, every spoken word in Chairman Powell’s press conference, and every dot in the dot plot forecasts of meeting participants for a hint to the future course of rates.

Such efforts are a waste of time. Consensus today is that the first rate cut will come around mid-2024. Whenever it happens, it will be dependent on the pace at which inflation declines between now and then, and the growth rate of the economy. The Fed has two mandates, price stability and sustaining economic growth. In 2022-2023, price stability became more important as inflation spiked out of control. It is still too high, but it is trending down and will continue to do so as long as real rates are notably positive. Without any further rate increases, the real rate will rise as inflation continues to fall. The closer inflation gets to the Fed’s 2% target, the sooner it can switch focus to overall growth. Right now, growth is still reasonably robust. Q3 growth could reach 3%. The Atlanta Fed is forecasting closer to 5%. Thus, at the moment, the focus continues to be on inflation, not sustaining growth.

But that should change in the months ahead. Student loan repayments restart this fall. That will impact consumption. Higher oil prices won’t hurt GDP per se but they will shift buying towards energy needs and away from discretionary spending. Some of the sectors that have led the economy for months, notably travel and leisure have started to falter. Domestic airline ticket demand is falling at a rate faster than normal seasonality suggests. Attendance at Disney World and nearby Florida resorts is down year-over-year. Retail sales are spotty. The outlook for Christmas as expressed by retailers is subdued. Even the dollar stores are feeling pressure. When the economy slows, lower income families feel the pain first. But whether the economy simply evolves into a soft landing or slips into recession is still unknown.

One factor that could influence that outcome is a financial surprise. In 2008, the economy was slipping into recession from the start. But the events of mid-September, when Lehman, Fannie Mae and AIG fell, caused outright angst. Americans didn’t know where their money would be safe. Treasury had to increase the size of insured deposits by over 150%. A slow economic deceleration threatened to morph into total collapse.

We got a hint of worry last spring when several regional banks failed, but the damage was contained. Americans at the time also had a cushion of savings left over from the pandemic. Will there be another shoe to drop? That’s anyone’s guess. There are seeds planted. Money supply is falling, commercial real estate assets are stressed from oversupply, lower occupancy and higher financing rates. The use of excess leverage by investors, small and large, whether it be on Treasury/futures arbitrage or speculation in 1-2 day options are symptoms. So far, none of these seeds have germination. There is no current crisis. But when rates remain elevated, money conditions tighten, banks come under increased regulatory scrutiny, and speculation increases, the odds of a serious problem increase. Again, I am not forecasting anything. Rather, I am raising a yellow flag to be watchful.

So, what gets markets moving up or down from here? Markets almost always flutter around an FOMC meeting. But this one isn’t likely to change the market’s course beyond 24 hours. Over the next few weeks, any progress or lack thereof settling high profile labor conflicts or avoiding a government shutdown could help or hurt. The first week in October will give us a better picture of economic activity in September, the most important month economically in the third quarter. Perhaps the most important indicator to watch is the direction of the 10-year Treasury. This morning it is back to exactly the high yield of last October. If it moves noticeable higher, that would spell trouble for stocks. Conversely, if either good inflation news or a deteriorating economy pushes the yield back down toward 4%, that would help. In technical terms, is this a double-top or a breakout to a fresh high for yield?

September is often a seasonally weak time for stocks, in large part because of the relative absence of data, allowing investors to fester and worry a bit about the unknown. Over the next few weeks, we will learn more pieces to the puzzle which may better define the market’s direction in the weeks ahead, at least until Q3 earnings season begins in mid-October.

Today, Lance Armstrong is 52. Former Phillies star Ryne Sandberg is 64.

James M. Meyer, CFA 610-260-2220

 

 

Additional information is available upon request.

Tower Bridge Advisors manages over $1.7 Billion for individuals, families and select institutions with $1 Million or more of investable assets. We build portfolios of individual securities customized for each client's specific goals and objectives. Contact Nick Filippo (610-260-2222, nfilippo@towerbridgeadvisors.com) to learn more or to set up a complimentary portfolio review.

# – This security is owned by the author of this report or accounts under his management at Tower Bridge Advisors.

Additional information on companies in this report is available on request. This report is not a complete analysis of every material fact representing company, industry or security mentioned herein. This firm or its officers, stockholders, employees and clients, in the normal course of business, may have or acquire a position including options, if any, in the securities mentioned. This communication shall not be deemed to constitute an offer, or solicitation on our part with respect to the sale or purchase of any securities. The information above has been obtained from sources believed reliable, but is not necessarily complete and is not guaranteed. This report is prepared for general information only. It does not have regard to the specific investment objectives, financial situation or the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed in this report and should understand that statements regarding future prospects may not be realized. Opinions are subject to change without notice.

Filed Under: Market Commentary

Previous Post: « September 15, 2023 – Auto workers are out on strike. So far, markets don’t care. They probably won’t care overall, unless the strike becomes extended. Elsewhere the public offering of ARM Holdings signals a healthier IPO market. Instacart is likely next. Traders are waking up from the late summer doldrums, but valuations, high bond yields and rising oil prices probably suggest more sideways churning ahead.
Next Post: September 20, 2023 – Today concludes the 2-day FOMC meeting. No change in rates is expected but investors will parse every detail of the post-meeting releases as well as comments from Fed Chair Jerome Powell. Recent data suggests both inflation and the economy are slowing. The ideal soft landing is still within reach, but it is also quite possible that the economy might slip into recession over the next few months. »

Primary Sidebar

Market Commentary

Sign Me Up!

Latest News

  • September 22, 2023 – Stocks fell sharply, continuing a negative reaction to the outcome of Wednesday’s FOMC meeting. While rates remained unchanged, the committee expressed a bias toward increasing rates again at the next meeting that ends November 1. In addition, the dot-plot of projections from Committee participants suggested only one (net) rate cut between now and the end of 2024. While short-term rates barely budged, yields on 10-year Treasuries rose by about 15 basis points, suggesting tougher economic conditions ahead, higher rates for longer and, by extension, lower P/E ratios. Lower P/Es mean lower stock prices.
  • September 20, 2023 – Today concludes the 2-day FOMC meeting. No change in rates is expected but investors will parse every detail of the post-meeting releases as well as comments from Fed Chair Jerome Powell. Recent data suggests both inflation and the economy are slowing. The ideal soft landing is still within reach, but it is also quite possible that the economy might slip into recession over the next few months.
  • September 18, 2023 – Markets are directionless, torn between better economic activity and an increase in storm clouds from labor unrest to China. What is crucial is the future trend for interest rates. Investors will parse this week’s FOMC meeting for clues, but probably won’t get a much clearer picture for their efforts.
  • September 15, 2023 – Auto workers are out on strike. So far, markets don’t care. They probably won’t care overall, unless the strike becomes extended. Elsewhere the public offering of ARM Holdings signals a healthier IPO market. Instacart is likely next. Traders are waking up from the late summer doldrums, but valuations, high bond yields and rising oil prices probably suggest more sideways churning ahead.
  • September 13, 2023 – Today’s focus will be on the August CPI report. The headline number will be disturbing thanks to higher oil prices, but core inflation is likely to stay muted. Bond yields have been creeping higher and are back at the top end of recent trading ranges. Any breakout to higher yields would be disturbing to equity markets.
  • September 11, 2023 – Spectrum and Disney are locked in a battle over how TV content is delivered to the home. Both want a bigger economic piece of the pie. The battle reminds us of the strike by actors and screenwriters. All are fighting for a bigger piece of a smaller pie. These battles are part of a process, one where the consumer will be the winner in the end. But before the wars end, there will be lots of carnage as economic reality sorts out those parts of the puzzle that cannot survive.
  • September 8, 2023 – The reported impending ban on the use of iPhones in Chinese government offices sent Apple’s shares reeling and infected the entire tech sector, sending stocks lower this week. While China’s government hasn’t officially commented, this news is yet another sign of the deterioration of economic cooperation between the U.S. and China. Economically, that can’t be a good sign.
  • September 6, 2023 – Stock prices remain slaves to interest rates. A spike in rates the past two days has put downward pressure on stock prices once again. Higher oil prices add further pressure. With little economic or corporate news coming that should change sentiment, the key data in the weeks ahead will focus on the pace of decline in inflation readings.
  • September 1, 2023 – We all hear about the lag effects of higher rates. That lag varies from sector to sector. When rates first started to rise, it affected home buyers immediately. But for those who financed or refinanced debt in 2020 or 2021, the impact was delayed. For some, that cheap debt is starting to come due. Over the next couple of years, debt service is going to become a bigger and bigger cost of doing business.
  • August 30, 2023 – At a time on the calendar when there is a dearth of economic and corporate data, traders look to the bond market for direction. Yesterday, yields on the10-year Treasury fell by almost 2% and stocks staged a solid rally. Trying to guess day-to-day moves in the bond market is pure folly, and thus trying to guess the stock market’s next move is equally foolhardy. Friday’s employment report could be market moving.

Footer

Wealth Management Services

  • Individuals & Families
  • Financial Advisors
  • Institutions & Consultants
  • Medical & Dental Professionals

Important Links

  • ADV II & CRS
  • Privacy Policy

Tower Bridge Advisors, a Philadelphia Wealth and Asset Management firm, is registered with the SEC as a Registered Investment Advisor.

Portfolio Review

Is your portfolio constructed to meet your current and future needs? Contact us today to set up a complimentary portfolio review, using our sophisticated portfolio analysis system.

Contact

Copyright © 2023 Tower Bridge Advisors

Philadelphia Wealth & Asset Management, Registered Investment Advisors

300 Barr Harbor Drive
Suite 705
West Conshohocken, PA 19428

Phone: 610.260.2200
Toll Free: 866.959.2200

  • Why Tower Bridge Advisors?
  • Investment Services
  • Our Team
  • Wealth Management
  • Investment Process
  • Client Service
  • News
  • Market Commentary
  • Economic Update Videos
  • Contact