Broker Check

Q3 Market Commentary

October 17, 2023

Global financial markets stumbled in the 3rd quarter of 2023. Stocks, bonds, and even gold and silver prices fell as interest rates and the US dollar moved sharply higher over the past three months. Stock market bulls may be tempted to dismiss the pullback as a seasonal phenomenon, citing historically weak returns in the August-September period. Those in the bearish camp, however, can be forgiven their dour outlook considering the ongoing (and accelerating) carnage in the bond market as the quarter unfolded.  

The tug-of-war between bulls and bears is the product of conflicting economic data and narratives surrounding the monetary policy response by the Federal Reserve Bank. Bulls view still historically low unemployment rates and declining core inflation readings as evidence of US economic resiliency through the pandemic period. This camp seems overly impressed by what they characterize as strong corporate earnings performance as companies emerge from pandemic-induced challenges. These folks are counting on the Fed to reverse course and start cutting interest rates tomorrow.

Bears, on the other hand, see things differently. Corporate earnings “beats” against low expectations don’t impress them, as they concern themselves with credit card debt eclipsing $1 TRILLION for the first time ever, exploding small business and consumer bankruptcies, and a housing market that has come to a screeching halt. These people haven’t forgotten about the ‘stagflation’ of the late ‘70s and early ‘80s – inflation can indeed persist alongside a no-growth economy (or even during a recession). The Fed’s stated intention to fight inflation until it’s tamed - regardless of the economic pain to be endured along the way – is what has both the bulls and bears worried. The only difference up to this point is that the bulls remain hopeful that such conditions won’t ultimately prevail, while the bears are convinced that we’re already well down that road.

Performance by the numbers (Q3/YTD 2023) for the major market indices follow:

S&P 500: -3.65%/+13.07%; NASDAQ Composite: -4.12%/+27.11%; Dow Jones Industrial Average: -2.62%/+2.73%; Russell 2000: -5.49%/+2.54%; MSCI EAFE: -4.94%/+7.59%; MSCI EM: -4.07%/+2.16%; Bloomberg Aggregate Bond: -2.95%/-1.21%.

Without the leadership of a handful of big technology stocks, equities have faltered. The S&P 500 index has failed to regain its all-time high for 21 months.  High grade bonds as measured by the Bloomberg Aggregate Bond Index have lost nearly 15% AFTER interest payments over the past 36 months. The average 30-year mortgage rate now stands at 7.4%. Conditions have changed, and the days of easy money are over. Time will tell whether recent performance is a sign that markets are finally coming to grips with this reality.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss.

Market data provided by JPMorgan Asset Management and

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following developed country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK.

The MSCI EM (Emerging Markets) Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of the emerging market countries of the Americas, Europe, the Middle East, Africa and Asia. The MSCI EM Index consists of the following emerging market country indices: Brazil, Chile, Colombia, Mexico, Peru, Czech Republic, Egypt, Greece, Hungary, Poland, Qatar, Russia, South Africa, Turkey, United Arab Emirates, China, India, Indonesia, Korea, Malaysia, Philippines, Taiwan, and Thailand.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell 3000 index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

The Bloomberg Barclays U.S. Aggregate Bond Index is an index of the U.S. investment-grade fixed-rate bond market, including both government and corporate bonds.

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