“The big money is not in the buying and selling, but in the waiting.”
-Charlie Munger
Here’s what you need to know this week:
· Macro factors point to a rate hike pause
· The S&P 500 marks its first new high since August
New Office – ONE Week Away!
Quick reminder, we’re moving! We will start the moving process at the end of next week, the new office is starting to really come together:
We will begin the moving process at the end of next week & the start of the following week, so bear with us if the office is a little messy in the next few days. We will be hosting open house events once we are fully settled in to the new office so keep an eye out for those announcements coming soon!
Cooler Weather, Cooler Economy?
Stocks rose last week after receiving two economic reports that indicate a potential pause in the Federal Reserve’s interest rate hiking efforts. The first was the Personal Consumption Expenditures (PCE) report for the month of August; PCE is the Fed’s preferred measure of inflation, and the report showed annualized inflation holding steady at 3.4%:
While this is still noticeably above the Fed’s long-term target inflation rate of 2%, it is also the third straight month where the rate of inflation has not risen. You can see on the chart above that inflation rose quickly after the onset of the Iran war in February but has moderated in the last few months, raising hopes that the worst of the war-related inflation is behind us.
The second encouraging report was the nonfarm payrolls (NFP) report for September showing the US economy adding just 29,000 jobs, less than the 50,000-100,000 jobs that analysts expected:
While it mays seem counterintuitive that lower job gains are good for stocks, a cooler job market means a cooler economy, and a cooler economy means the Federal Reserve may need feel the need to pump the brakes via rate hikes. The bond market responded positively to both reports and is now assigning a 19%chance of an interest rate hike at the Fed’s next meeting, much lower than the 71% chance that bonds were predicting just one week ago[1].
Back to New Highs
The S&P 500 broke to new record highs on both Monday and Tuesday this week after being rangebound for most of the past two months. The rising odds of a rate hike pause have certainly bolstered investor sentiment, but investors may be looking ahead to the coming year. Historically speaking, the year following midterm elections is the best year of a presidential term for stock market returns:
Past performance does not guarantee future results, but there is a clear trend here. As data becomes democratized, more investors have access to information like this, potentially leading investors to buy stocks ahead of the midterms and pushing prices up accordingly. Interest rates, inflation and the midterm election will continue to cloud the market outlook in the short-term, but don’t be surprised if stocks continue to climb as we head into November.
What Else
· The pope rebuked AI researchers from Anthropic who pushed the pope to acknowledge machine consciousness
· G7 countries agreed to release 100 million barrels from strategic reserves to alleviate rising oil prices
· The FTC opened a formal probe of OpenAI and Anthropic over AI agents
· The Brazilian presidential election is headed to a runoff between incumbent president “Lula” da Silva and Flavio Bolsonaro, son of former president Jair Bolsonaro
· Passengers on a FlyDubai airplane incapacitated the plane’s copilot after an attempted hijacking
· OU plays Texas in the Red River Rivalry this Saturday at 2:30 PM on ABC
· OSU plays UCF this Saturday at 11:00 AM on ESPN2
What We’re Reading
Starting next year, the government will start a Saver’s Match program aimed at helping lower-income citizens build for retirement. This program will 50% match retirement contributions for single filers earning under $35,500 adjusted gross income (meaning after deductions) or $70,000 for married couples filing jointly. Click below for more details and reach out to us if you’d like to learn more about the program:
What’s Happening Downtown
Get ready for the upcoming OKC Thunder season at Thunder Fan Fest this Sunday, October 11th. This event runs from 4:00 – 8:00 PM and is free to attend, and if you RSVP you will enter a drawing to win two free tickets to the Opening Night game vs. the Denver Nuggets on October 22nd. This event also features live music, on-court skill challenges, interactive art installations, giant inflatables, food trucks, merch stations and more. Click below for a full list of activities and a parking map:
To read more from our blog, click here
Written by: Kane Ogle, CFP®
Steve Beck, Kane Ogle, CFP®, Amber Eduvigen, CFP®, Cale Olbert, CFP®, Brett Valentine, CFP®, Brandon Ingerson, Bill Daniel, Sam Postich, Jenni Hess, Hannah Hartman
[1] CME Group