October 10, 2023
Dear Client,
As we welcome the cooler evenings and turning leaves of fall, we can take time to enjoy the boys of summer entering the playoffs while football is in full swing. We are pleased to present you with your 3rd quarter reports.
Historically, August and September have provided disappointing returns for investors, according to monthly S&P 500 data from the St. Louis Federal Reserve.
Since 2010, the average monthly decline for the S&P 500 Index is -1.2%, the worst-performing month (excluding reinvested dividends).
It’s important to note that this isn’t a new trend.
Since 1970, the S&P 500 has averaged a 1.0% dip in September, which is also the worst-performing month during the period surveyed.
September has finished higher six times since 2010. But last month, September didn’t buck the averages. The S&P 500 Index finished lower for the fourth straight year.
Stocks & commodities have performed well. September sent bonds & real estate into the red.
Source: The Capital Spectator
Last month’s market decline cannot be attributed to economic weakness. In fact, the economy has been surprisingly resilient. There hasn’t been a significant increase in the rate of inflation either. Although gasoline prices have recently risen, the price hikes for most goods and services have moderated.
Moreover, unexpected economic resilience may translate into stronger-than-expected corporate profits when Q3 reporting begins this month.
Instead, a jump in Treasury yields and a hawkish tilt by the Federal Reserve generated stiffer headwinds.
The Fed held its key rate, the Fed funds rate, at 5.25%‐5.50% in September but kept the door open for another .25 percentage-point rate hike this year.
While prior projections have indicated the possibility of rate cuts next year, the Fed penciled in fewer reductions, according to its official projections.
It boils down to economic performance and inflation. The rate of inflation has slowed, but inflation remains roughly double the Fed’s 2% annual target.
The Fed is walking a tightrope. It hasn’t let up on its tough anti-inflation rhetoric, and it hopes to lower the rate of inflation without tipping the economy into a recession.
Fed Chief Jerome Powell repeated the Fed’s 2% annual goal eight times in the opening remarks at the press conference that followed the Fed’s meeting.
In contrast, investors had been betting that the Federal Reserve was finished raising interest rates while anticipating a more accommodative stance next year.
Without diving into the minutia and academic theory behind interest rates and stock prices, let’s keep it simple. Higher interest rates create stiffer competition for an investor’s dollar.
Investor’s Corner
Successful investors look past seasonal anomalies.
While exercises that pinpoint general seasonal patterns make for an interesting discussion and may help uncover some of September’s weakness, we know that market timing and implementing strategies based on timing aren’t a realistic approach.
So, focus on what you can control. You cannot control returns, but you can control your investment strategy and plan.
Successful long-term investors recognize that a disciplined approach is the shortest path to achieving financial objectives.
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Personal Notes @ SVWA:
Tracy and Roberta have been playing a bit more golf. Roberta has joined a pickleball league, while Tracy yearns for days on the racetrack. They made a quick journey to Chicago to visit with daughter, Jamie, as she adjusts to living in the windy city.
Scott Ponder and Erin made their annual trip to the Monterey Jazz Festival this year. The music was amazing, the weather was perfect, and attendance seemed back to the pre-Covid numbers. They are already looking forward to next year, 2024!
Scott Yang and the family had a fun summer traveling to Austin, Texas. On their excursion, they discovered some good barbeque and happenings in the city's surroundings. They also took a road trip to Oregon and stopped to appreciate the beautiful waterfalls and lakes. They enjoyed some good local brews and eateries.
Mo and her family took a weeklong trip out to Gualala, California to relax. Mo took a woodworking class and made a candle holder. She was able to use a variety of tools such as a table saw, router, miter saw, bandsaw, and orbital sander. She plans to sign up for another class in woodworking, making cutting boards.
Lisa visited Denver, Colorado for the FPA’s NexGen conference. She also had time to hike some trails around Red Rock Amphitheater and Garden of the Gods. Her favorite book this past quarter was Fourth Wing by Rebecca Yarros which is a fantasy book with war, romance, and dragons.
Charles has been studying intensely for his upcoming CERTIFIED FINANCIAL PLANNER ™ exam in November. He plans on traveling once he passes his exam. Next on his list to check off is Mount Lassen, National Park.
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We trust you've found this review to be educational and helpful. If you have any questions or want to discuss any matters, please feel free to call us.
As always, we are honored and humbled that you have allowed us to serve as your financial advisor.
Thank you for the trust you have placed in us.
Gratefully yours,
The Silicon Valley Wealth Advisors Team
Tracy Lasecke, CFP® Scott Yang, CPA, CFP® Scott Ponder, MBA, CFP®
Monique Ruiz Lisa Ozaki, CFP® Charles Tran
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