The final quarter of the year started well for stocks as the S&P 500 rallied about 8% in October.  While the reprieve was welcomed by investors the S&P 500 is still down about 19% for the year.  Interest rates continued to march higher during the month as the 10 Year Treasury closed the month yielding over 4%, and the 30-year mortgage rate over 7%.  (YCharts)

Concerns are still centered on inflation, Fed policy and the increased chances of recession.  Our economic dashboard once again showed further deterioration with the inversion of our yield curve indicator.  This is reflective of the increasing recession risk we’ve seen throughout the year.  As such, we have been defensively positioned with a portion of our growth portfolio throughout much of this year.  This defensive positioning has been beneficial, and we are now thinking about how to take advantage of the cash we have on the sidelines by looking for potential opportunities to put our defensive allocation back to work.    

November is a busy month and below we’ve outlined a few items to watch as we move toward the end of the year:

1. Interest Rates: The Fed meets at the beginning of the month (Nov 1-2) and is widely expected to raise rates by 0.75% for the fourth meeting in a row.  Investors will be looking for signs that the Fed might be willing to slow down the pace of rate hikes when Chair Powell holds his press conference. (CME Fed Tracker)
2. Mid-term elections – Mid-terms fall in the second week of the month and markets will be watching closely.  Historically, the fourth quarter of mid-term years has been strong for stocks, and the year following mid-terms (the 3^rd year of a presidential cycle) has also been better than average. (LPL Financial)
3. Inflation Data: In addition to the Fed, investors are hopeful that inflation data starts improving.  CPI data will be released Nov 10^th and will likely be analyzed closely.
4. Corporate Earnings – The 3^rd quarter earnings season has shown businesses’ resilience thus far, but the remaining corporate earnings results, and more importantly, forward guidance could provide additional signs of how businesses are managing the current environment.

As we navigate this challenging market environment, we will continue to watch the market and economic data closely and are ready to make changes as needed.  Please don’t hesitate to reach out if you have any questions and please feel free to pass this email along to any friends, family, or colleagues that you feel would benefit.

Sincerely,

Your Team at TLWM

*Investment advice offered through TLWM, LLC., a registered investment advisor.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

*Credit risk can be a factor in situations where an investment’s performance relies on a borrower’s repayment of borrowed funds. With credit risk, an investor can experience a loss or unfavorable performance if a borrower does not repay the borrowed funds as expected or required. Investment holdings that involve forms of indebtedness (i.e. borrowed funds) are subject to credit risk.

* Typically, the values of fixed-income securities change inversely with prevailing interest rates. Therefore, a fundamental risk of fixed-income securities is interest rate risk, which is the risk that their value will generally decline as prevailing interest rates rise, which may cause your account value to likewise decrease, and vice versa. How specific fixed income securities may react to changes in interest rates will depend on the specific characteristics of each security. Fixed-income securities are also subject to credit risk, prepayment risk, valuation risk, and liquidity risk. Credit risk is the chance that a bond issuer will fail to pay interest and principal in a timely manner, or that negative perceptions of the issuer’s ability to make such payments will cause the price of a bond to decline.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

* This document is solely for informational purposes. Advisory services are only offered to clients or prospective clients where TLWM Financial and its representatives are properly licensed or exempt from licensure.

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