Third Quarter 2023 Review

Stocks were pressured lower in the third quarter by rising 10-year U.S. Treasury bond yields. In the three months ending September 30, the yield on the 10-year climbed from 3.86% to 4.57%, while the S&P 500 fell -3.3% over the same period. To sum up the third quarter in a single sentence: long-term interest rates went up a lot, and stocks went down modestly (with short-term rates flattish at already high levels).

Looking ahead, we expect to see softness in the macroeconomy as rates shifted higher, but moderating growth does not necessarily equate to equity market weakness. With the nine-month bear market in 2022, we believe a new sustainable low was established for many important components of the S&P 500. We’ve now arrived at a time when earnings are expected to accelerate to the upside in the coming months, with continued earnings growth in 2024 as margins rebound after a period of softness.