Last week U.S. stocks ended the third quarter at their low point of the year. Then amazingly enough, on Monday and Tuesday the Dow rallied more than 1,500 points, and the S&P 500 posted its best two-day gain since 2020. In our view, the stellar start to this week doesn’t mean the market will have an uninterrupted recovery. Rather, it’s a nod towards the virtue of patience and shows that the best days (or weeks, etc.) of stock investing often happen on the heels of the worst days (or periods of time).
To summarize – if not oversimplify – a theme, the stock markets are suffering by persistent inflation that is by now embedded in the economy and rapidly rising interest rates. Stocks also reacted negatively last week to unsettled trading in the bond and currency markets. News out of the U.K. provided crosswinds to international capital markets. The markets viewed the U.K.’s recently announced unfunded tax cuts as counterproductive to the BOE’s inflation-fighting efforts. However, the BOE’s decision to begin temporary purchases of British government bonds was apparently well-received by capital markets last week, sending U.K. bond yields lower.
We will keep our eye on these developments. Let us know if we can answer any questions in the context of your financial or investing journey.