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The Financial Quarterly

How Did Markets Perform Last Quarter?

S&P 500
-3.7^%
The broader U.S. market lost ground in a weak third quarter as investors ran out of good vibes.¹

NASDAQ
-4.1^%
The tech-focused NASDAQ dropped in Q3 as macroeconomic worries eroded investor confidence.¹

DOW 30
-2.6^%
The blue-chip Dow also fell on macroeconomic worries but held up better against its counterparts.¹

Looking Ahead

What Factors May Influence Markets in the Months to Come?

Let’s take a look ahead at some of the factors that we’ll be watching in the weeks and months ahead.

Interest rates
The Federal Reserve indicated that it expects to raise rates once more in 2023. The expectation of higher rates is likely to impact markets.²

Economic data
Investors will be closely watching reports on housing, labor, consumer confidence, and other sectors for clues about the economy’s health and future Fed moves.

Recession indicators
Opinions as to whether the economy is slipping into a recession remain mixed and recession fears are likely to stoke market volatility.³

U.S. Politics
Repeated fiscal showdowns in Washington and the ramp-up of 2024 election news could inject extra uncertainty about politics.⁴

Retail spending
The holiday shopping season is critical for retailers so investors will be monitoring trends for insights about consumer spending.

Key Takeaways for Savvy Investors

What conclusions should we draw from a rocky third quarter?

Progress is not linear.
Though worries about the economy dogged markets this quarter, all is not lost.
There is plenty to be optimistic about.
The economy is still chugging along and the labor market continues to show strength.5
The major challenge ahead is that the Fed must maintain a delicate balance between keeping interest rates high enough to fully douse inflation while not triggering a recession.
Until that job is done, markets are likely to respond with volatility to any news that points to higher interest rates.

Will we still see a recession in 2023?
That’s hard to say because by the time we know the answer, we’ll likely already be in 2024.
Plenty of economists believe that the risk of a recession is low.3
Others see red flags and think that we won’t be able to avoid a recession this year or next.3We’ll just have to wait and see which prediction is correct.

Bottom line: we’re watching the data, staying flexible, and looking for opportunities.

Sources:

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