Do you remember the song We Didn’t Start the Fire by Billy Joel?  It’s the one where he runs through a litany of people, situations, places, and events.  Today, there seems to be so much warranting attention, a list appears to be a good way to share some of the issues at hand.  Before doing so, keep in mind the stock market is trading at about the five-year average multiple.  Earnings are forecasted to improve.  Interest rates are on the rise.  Inflation has come down.  The strikes, oil prices, and resiliency of the economy are making the Fed’s job harder.  And, a data dependent Fed may be lacking data if the government shuts down…. 

Issues to ponder:

• As of last week, the bottom-up Wall Street consensus suggests 19% upside for the S&P 500 over the next 12 month, per FactSet.  From their lips to God’s ears!
• The Atlanta Fed’s GDPNow’s latest reading for Q3 GDP stands at 4.9% for Q3, per 9/19 reading.  The next reading is to be released 9/27.
• The US debt surpassed $33 trillion dollars, last week. 
• Interest rates on US Treasuries were the highest seen since 2007.
• As rates rise, debt service becomes more burdensome for the Federal Government. 
• A possible government shutdown is looming.  Unless a compromise is made this week, the US Government will shut down once again over this coming weekend.  Will Moody’s join S&P and Fitch with a downgrade of the US credit rating next?
• The Summary of Economic Projections from the FOMC, referred to as Dot Plots, shows a median forecast for Fed Funds rates to increase another 25 basis points this year. 
• Two Fed officials confirmed rates could rise higher in speeches delivered Friday.  We’ll listen to other Fed officials in the coming days. 
• The median forecasts for 2024 suggests a Fed Funds drop of 50 bps next year vs the prior estimate of 100 bps to be cut.
• The US Money Supply report will be issued tomorrow. 
• The S&P 500 price-to-earnings multiple (P/E) ratio stands at the five-year approximate average.
• The third reading of 2Q GDP will be released this week.  The last reading suggested a 2.4% annualized growth rate for 2Q.
• PCE – Personal Consumption Expenditures, the Fed’s preferred measure of inflation is to be released this week.
• Approximately half of the components of the S&P 500 are positive year-to-date, with the other half being negative.   However, the frequently referenced market-cap weighted S&P Index is up 10 – 12 times relative to the less commonly used equal-weighted index, suggesting the market has moved back to a more concentrated, narrowly focused, rally.  Ideally, a broader rally is more desirable.    
• Larger companies have performed better YTD than smaller and mid-sized companies. 
• Growth continues to outperform Value, YTD.
• With interest rates rising, the Bloomberg Aggregate Bond Index is negative, YTD.

Going back to the song while humming the tune.  Some believe the message is that there have always been problems and perhaps there will continue to be issues.  Similarly, there’s almost always something in the economy and markets of concern.  In fact, the old adage about the market climbing a wall of worry, comes to mind.  Currently, the market appears to be trading at fair value – neither so rich to warrant selling, nor so inexpensive to rush in to buy more.  When fairly valued, neither upside nor downside comes as a surprise.  We believe long-term investors will be rewarded for holding to their long-range plan.  If changes have occurred re: risk profile, cash, time horizon, or anything else, we would be delighted to discuss.  This information, in addition to changes in the outlook for the economy, markets, and portfolio, can be helpful in confirming if our plan is in order.  We’re here if you need anything or care to discuss in greater detail.

Thank you for your continued trust and business.