September 21, 2023
Good morning,
As widely expected, the Fed delivered a “hawkish pause” yesterday. The FOMC (Federal Open Market Committee) left the fed funds target unchanged, at a range of 5.25% to 5.50%. The statement and press conference reinforced Powell’s Jackson Hole speech of restriction for longer. The Dot plot (the chart of FOMC participants’ projections of where they expect the Fed Funds rate to be over the next 2+ years), indicates one more rate hike by the end of the year, consistent with the previous message from June. There are two meetings left this year, and the market is currently pricing in a higher likelihood for a December hike vs. November.
Next year, the dots project only two rate cuts, down from four cuts from last June’s plot, with the 2024 year-end Fed Fund rate range of 5.00-5.25%. The Fed’s future economic growth projections were revised upward yesterday, and expectations for unemployment were revised downward. Both fly in the face of reigning in inflation to the Fed’s 2% long-term target. Hence, higher rates for longer than expected continue to be the constant drum beat of the controllers of interest rates in the U.S.
Translation for markets – bond yields rise (prices down), stock prices decline, and the dollar climbs higher. The S&P 500 Index (SPX) was off -0.96% yesterday and is down a like amount again this morning in pre-market trading in the Futures market.
Let’s look at the S&P 500 one year chart. First support, the horizontal white line, is 4340. If that line is broken, it would appear that the August correction has resumed. In August, we defined 4200 as the dividing line between a normal correction of 5-8% from this year’s high of 4600, or something worse (say, the end of this cyclical bull market). SPX closed at 4402 last night, 4340 (-1% away) is likely to fail, leaving a wide open space to 4200 (almost 5% wide). There is a lot of room between normal correction and the end of this cyclical bull. There’s no reason to be overly concerned at the moment, then. The technical evidence supports the correction narrative and does not yet lean toward something worse.
The next big hurdle for this market is month-end budget setting for the U.S. government. We’ll talk about that on Monday. Until then…
Be well,
Mike
Disclosures
Investment advisory services offered through Robertson Stephens Wealth Management, LLC (“Robertson Stephens”), an SEC-registered investment advisor. Registration does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. This material is for general informational purposes only and should not be construed as investment, tax or legal advice. It does not constitute a recommendation or offer to buy or sell any security, has not been tailored to the needs of any specific investor, and should not provide the basis for any investment decision. Please consult with your Advisor prior to making any investment decisions. The information contained herein was compiled from sources believed to be reliable, but Robertson Stephens does not guarantee its accuracy or completeness. Information, views and opinions are current as of the date of this presentation, are based on the information available at the time, and are subject to change based on market and other conditions. Robertson Stephens assumes no duty to update this information. Unless otherwise noted, any individual opinions presented are those of the author and not necessarily those of Robertson Stephens. Performance may be compared to several indices. Indices are unmanaged and reflect the reinvestment of all income or dividends but do not reflect the deduction of any fees or expenses which would reduce returns. A complete list of Robertson Stephens Investment Office recommendations over the previous 12 months is available upon request. Past performance does not guarantee future results. Forward-looking performance objectives, targets or estimates are not guaranteed and may not be achieved. Investing entails risks, including possible loss of principal. Alternative investments are speculative and involve substantial risks including significant loss of principal, high illiquidity, long time horizons, uneven growth rates, high fees, onerous tax consequences, limited transparency and limited regulation. Alternative investments are not suitable for all investors and are only available to qualified investors. Please refer to the private placement memorandum for a complete listing and description of terms and risks. This material is an investment advisory publication intended for investment advisory clients and prospective clients only. Robertson Stephens only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Robertson Stephens’ current written disclosure brochure filed with the SEC which discusses, among other things, Robertson Stephens’ business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov. © 2024 Robertson Stephens Wealth Management, LLC. All rights reserved. Robertson Stephens is a registered trademark of Robertson Stephens Wealth Management, LLC in the United States and elsewhere.