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.