Equity Risks On The Rise

By Scott Poore, AIF, AWMA, APMA
Chief Investment Officer, Eudaimonia Group

Markets pulled back last week as recession fears begin to mount, as well as thoughts that the Fed is behind the curve.  The probability of a 25 basis point rate cut or a 50 basis point rate cut has shifted since Friday's labor report.  Just a week ago, there was only a 30% probability of a 50 basis point cut.  Friday, that moved higher to a 37% probability, but as of this morning, it's back to only a 29% probability of a 50 bps cut.  The reality is whether it's 25 or 50 bps, it probably won't move the needle on the housing market as more than 62% of current mortgages are at or below 4%, which means even 50 bps wouldn't get the 30-year mortgage below 5.5% to get homebuyers off the sideline.

We are entering a time of the calendar year when equities tend to be weak.  Most of the monthly returns for the S&P 500 in September, going back to 1950, have been negative.  The Yield Curve finally closed uninverted last week as the 10-year Treasury Yield ended the week at 3.72%, while the 2-year Treasury Yield finished at 3.65.  This is the first time the two yields have closed uninverted since July of 2022.  Defensive sectors like Utilities, Consumer Staples, and Financials are positive more than 7% on average since the middle of July.  Meanwhile, Semiconductors, Consumer Discretionary, Technology are down more than 8% over the same time period.  There are still sectors to find value among equities.

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The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.

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