Just when we thought things couldn’t possibly get worse in D.C., the GOP went ahead and reminded us how dysfunctional things really are. After reaching a pivotal measure to stave off a government shutdown (for at least another 45 days) last weekend, a dissenting group on the far right pulled the pin on Speaker McCarthy’s tenure. Now with less than 40 days until the next potential shutdown, the coming week will be spent determining who the next Speaker will be. As usual, the political maneuvering is already in full swing as a potential vote takes shape by midweek. The deal making will certainly be in motion as with any chaotic turn comes “opportunity.” Reps Scalise and Jordan appear to be the front leaders at this point but the person who can find the middle ground between the party fractions will likely prevail. One thing is certain, if actions aren’t taken quickly and with meaningful purpose, we will find ourselves in the same predicament come mid-November. Kicking the can down the road can only last for so long.
More Economic data points were released on Wednesday via the private payroll report. According to ADP, private job growth totaled just 89,000 for the month of September, well below the estimate of 160,000 from Dow Jones. This morning we saw the release of the nonfarm payroll numbers showing payrolls soaring by 336,000 for September, well above estimates of 170,000. Leisure & hospitality led the job gains and government and health care came in right behind. Policymakers worry that an ongoing tight labor environment will continue to put upward pressure on wages which in turn fuels higher prices.
Many investors are wondering what is causing the recent volatility we have seen in our financial markets over the last few weeks. At the center of the storm is the 10-year Treasury yield, one of the most influential numbers in finance. The yield, which represents borrowing costs for issuers of bonds, has climbed steadily in recent weeks and reached 4.8% on Tuesday, a level last seen just before the 2008 financial crisis. At the heart of the steady climb in the 10-year bond yield was the belief that the Fed would actually begin cutting rates in 2024, and that notion has largely been dispelled now. The Fed has reiterated in recent weeks that “higher rates for longer” is the new mantra. This has caused investors to pause and reflect on what that will mean for the consumer. The 10-year yield is considered the benchmark in global finance. “While shorter-duration Treasurys are more directly moved by Fed policy, the 10-year is influenced by the market and reflects expectations for growth and inflation. It’s the rate that matters most to consumers, corporations, and governments, influencing trillions of dollars in home and auto loans, corporate and municipal bonds, commercial paper, and currencies. When the 10-year moves, it affects everything; it’s the most watched benchmark for rates,” according to Ben Emmons, head of fixed income at NewEdge Wealth. As anyone looking to borrow in recent weeks has noticed, the jump in mortgage rates and car loans has moved significantly higher. We know this won’t last forever, but if the Fed has any real clue as to what is occurring, the possibility of further increases to the base rate is quickly fading.
The 4th quarter might be starting off a little rockier than we would hope, but this is all part of the chess game that is being played. The world is and remains a little messy right now. We knew that going into the second half of 2023 would likely prove to be more challenging than the first half. That scenario has certainly played out. Remaining invested in high quality investments with some cash on hand (paying better rates for a change!) will help us weather this latest storm. It’s not a perfect science but a strategy that has proven to be successful over the long-term. Hang in there, we are here for you!
Have a nice weekend!
Christopher E. Wasson, CFP®
Mosaic Asset Partners, LLC
1122 Kenilworth Drive, Suite 310
Towson, MD 21204
410.821.0089 fax 410.821.5993
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Mosaic Asset Partners, LLC is not affiliated with Kestra IS or Kestra AS. Investor Disclosures: https://www.kestrafinancial.com/disclosures
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra IS or Kestra AS. The material is for informational purposes only. It represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. It is not guaranteed by Kestra IS or Kestra AS for accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.