Archives: Insight

Weekly Market Insights – Monday, October 9, 2023

Stocks Surge Following Robust Jobs Report:

Despite a turbulent week, stocks managed to rebound on Friday.
Over the last month, The Dow Jones Industrial Average returned –3.11%, while the Standard & Poor’s 500 returned –3.35%. The Nasdaq Composite index returned –3.02%.

Source: Charles Schwab & Co, Inc.

Friday Rally: A Strong Finish

Stocks surged on Friday following an employment report that exceeded Wall Street’s expectations. Initially, fears of potential rate hikes by the Federal Reserve caused a spike in bond yields and led to significant early morning losses. However, a retreat in yields prompted a turnaround as investors shifted their focus to the month’s moderate wage growth. This positive shift in sentiment contributed to a strong finish for the market.
Stocks were shaky for much of last week on rising bond yields. When Treasury yields hit their highest level since 2007 on Tuesday, stock prices dropped, leaving the Dow Industrials in negative territory for the year. The catalyst for the day’s spike in interest rates was a surprisingly strong JOLTS (Job Openings and Labor Turnover Survey) showing nearly one million more open jobs than investors had expected.1

Jobs

The job market continues to display remarkable resilience. August JOLTS showed job openings exceeded 9.6 million, above the consensus estimate of 8.8 million. A weak Automated Data Processing (ADP) private payroll job growth (released Wednesday) that showed 89,000 new private sector jobs appeared to be an outlier compared to the other reports.2,3
Friday’s monthly employment report showed a robust gain of 336,000 new jobs, nearly double the consensus forecast of 170,000. At the same time, the previous two months saw significant upward revisions of 119,000 (combined) from initial reports. Wage gains rose modestly, coming in below expectations and striking a hopeful note on inflation.4

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

1. CNBC, October 3, 2023
2. CNBC, October 3, 2023
3. CNBC, October 4, 2023
4. CNBC, October 6, 2023

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/.

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Remember September

By Gary Aiken | October 5, 2023

I was driving home from my younger son’s soccer practice. He plugged his iPhone into the car stereo and started playing “September” by Earth, Wind & Fire. The horns blazed, and the smooth vocals of Maurice White asked the question that inspired my son to play the song, “Do you remember the 21st night of September?”  It was indeed the 21st night of September. The air smelled more like a teenager after soccer practice than love, but the joke was made and was, to some extent, funny.
Bond markets, stock markets, and currency markets stumbled their way through the tumult of an altogether familiar September experience. When markets go down, as they often do, I lean on the elements of a strong investment. Earth, Wind & Fire leave out the fourth classical element: Water. In investments, I search for an element that flows like water, but its consistency and color are printed fabric and green. Of course, I refer to cash and cash flow.
From an accounting perspective, Free Cash Flow is defined as what is left over after operating costs, taxes, and replenishing working capital are subtracted from revenue. Businesses that can grow revenue while keeping operating costs and taxes low, and that require only minimal capital to operate, can generate enormous free cash flow and value to their investors.
Revenues for S&P 500 companies grew 8.4% for the twelve months ending June 30th. Gross Domestic Product (GDP) in current dollars grew by 5.9% for the same period. Generally, revenues for the market follow the growth of the economy. The chart below illustrates the close relationship between GDP growth and revenue growth for U.S. companies. The chart also demonstrates a point we often make to clients worried about inflation. Stocks have tended to be a decent inflation hedge because, during inflationary periods, many companies can pass on higher costs to end consumers. Those higher prices show up in revenues.

S&P 500 Total Revenues Follow GDP

Source: Bloomberg Finance L.P.

Not all companies see the same kind of growth. We were somewhat perplexed by government statistics purporting to show strong retail sales numbers over the summer. Department stores, retailers, airliners, restaurants, auto sellers, and other consumer-facing businesses painted a very different picture during earnings conference calls. This month, the government released a significant downward revision from 1.7% to 0.8% for retail sales during the second quarter. We expect that trend to continue and that rising gasoline prices may account for any acceleration in the third quarter for retail sales.
Free cash flow has grown fastest in two sectors over the past ten years – Information Technology and Healthcare. A nearly mandatory upgrade cycle and the obvious benefits to user productivity drives technology sector growth. Both demographics and the healthcare payment structure (government and employment-driven insurance) ensure growing revenues in that sector. While the cycle of reinvestment for these companies is primarily in Research and Development, those costs can be capitalized and depreciated over time. The actual costs of production, the manufacturing of drugs or software, are muted by comparison, so working capital needs are generally low, and corresponding debt levels are low. That depreciation that we spoke of helps to defray tax expenses. What is left over? Superior free cash flow growth that has driven above-average returns. Unsurprisingly, at the end of the third quarter, Healthcare and Technology stocks represented almost 45% of the S&P 500 Index.
The chart below displays this point. We see the rise in the price of the S&P 500, but also the growth of Free Cash Flow per share in the Healthcare and Information Technology sectors. The average of all the other sectors lags by comparison. On a technical note, the financial sector does not typically use the “free cash flow” methodology as their revenue, expense, and working capital are all essentially money-based. Financial companies (banks in particular) are unique animals that we’ve discussed in previous letters and, for this discussion, are relatively unimportant.

Free Cash Flow Per Share Growth Drives Long-Term Value

Source: Bloomberg Finance L.P.

As September ended, I noted to Concord advisors that since 1987, there have only been three instances where the Bloomberg Aggregate Bond Index has declined for five months in a row. This is one of them. In 2022, we experienced this price action, and before that, we would have to return all the way to Alan Greenspan’s inflation fight in 1994. I wrote about what I think is driving these negative bond returns in my August commentary on the yield curve. One of the scenarios I imagined was if inflation might be deemed to be sticky or that the Fed (and other central banks?) would tacitly give up on trying to move inflation down to their targets quickly.
September included meetings of the Federal Reserve Open Market Committee (the Fed), the Bank of England (BOE), the European Central Bank (ECB), and the Bank of Japan (BOJ). Each central bank seemed confused about what to do in the face of their unique situations in terms of growth, but similar situations in the face of persistent inflation. Our central bank, the Fed, seemed to be hawkish on keeping short-term rates elevated to fight inflation but painted a picture of a growing economy that did not quite match the inflation-fighting rhetoric. In Europe, persistent inflation in the face of deteriorating economic conditions left the ECB Chair, Madame Lagarde, nearly throwing up her hands in frustrated capitulation. The BOJ, on the other hand, seems to be relishing Japanese inflation after battling deflation for a generation.
Concord Asset Management favors underweighting international stocks against this backdrop. Rising interest rates and a stronger economy in the United States mean strength for the dollar and U.S. stocks versus other currencies and stock markets. We continue to favor a bond portfolio constructed with short-duration bonds. We believe that the inverted yield is more likely resolved by a bear flattening – that long-term rates are likely to go up faster than short-term rates. The chart below shows this flattening playing out in the U.S. Treasury yield curve from March to September this year.

U.S. Treasury Yield Curve

Source: Bloomberg Finance L.P.

Energy stocks performed well this summer. While we did not anticipate oil prices rising significantly, we summarized our thesis that there was most likely a near-term floor in the price of oil in our Halftime Report. Global energy demand continues to grow, albeit at a slower pace. At the same time, supply seems relatively constrained by an OPEC that wants to cut supply, a U.S. industry happy to earn increasing profits on existing infrastructure, and a Russia that is realizing a smaller discount to the global price now than when the War in Ukraine first started.
The rising prices of oil and gasoline are not nearly as severe a growth dampener as they were in the 1970s. These price increases will certainly impact retail sales though as more dollars shift to gasoline.  Naturally, energy costs will drive a greater persistence in U.S. inflation. While the price of oil at its current level should not have much of an impact on economic growth in the United States, I am reminded of research done by The Northern Trust Company, which concluded that three things generally cause recessions: a central bank mistake, a geopolitical crisis, and an energy shock. West Texas Intermediate crude oil at $90 per barrel does not seem like a giant shock, especially on an inflation-adjusted basis, but a spike higher is a risk.
Finally, September has historically been a bad month for stocks. Since 1987, September has recorded a negative 0.75% return for the S&P 500 Index on average. This September, the S&P 500 was down 4.8%. Over the summer, stocks cooled off after a tremendous run that saw stocks try to approach new highs through mid-July. At that time, many pundits were calling this a new bull market. Given our generally cautious view, I wonder if it was merely a bear market rally and if the next leg could be lower. Timing markets is difficult, though, and seasonally speaking, October, November, and December tend to be very good months on average for stocks.
When I was young, my mother gave me a book of classic Broadway tunes for piano players (I count myself among them, although I don’t practice nearly as much as I used to!). Among the songs in that book, I played for her one from a musical called The Fantasticks. The song starts, “Try to remember the kind of September…”  We’ve wrapped up a traditional kind of September in markets. The Summer doldrums lead to lackluster returns and a coincident drop off in sentiment. We long backward for vacations as we return to our desks and school. The song implores us to “Try to remember, and if you remember, then follow.” A new earnings season follows September. Information Technology and Healthcare stocks will be reporting, and more likely than not, those companies will report higher profits and higher free cash flows. Thanksgiving and Christmas will start to appear in our sights, and markets may follow on to look towards the future.
Do you remember the times when you were bearish in September? If you remember that kind of September and what is likely to follow in the months, quarters, and years to come, the kind of September we had may be a chance to buy great companies at reasonable prices.

Author

Gary Aiken, Chief Investment Officer

Gary Aiken is the Chief Investment Officer for Concord Asset Management and is responsible for macroeconomic analysis, asset allocation, and security selection, as well as trading and investment operations.

Gary has over 21 years of investment experience and holds an undergraduate degree in economics from the University of Maryland and an MBA from The George Washington University School of Business.

—

Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Concord Asset Management, or any non-investment related content, made reference to directly or indirectly in this article will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this article serves as the receipt of, or as a substitute for, personalized investment advice from Concord Asset Management. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Concord Asset Management is neither a law firm, nor a certified public accounting firm, and no portion of this content should be construed as legal or accounting advice. A copy of Concord Asset Management’ current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/. Please Note: If you are a Concord Asset Management or Concord Wealth Partners client, please remember to contact the firm in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing, evaluating, and/or revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Concord Asset Management and Concord Wealth Partners shall continue to rely on the accuracy of information that you have provided. Please Note: If you are a Concord Asset Management or Concord Wealth Partners client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, October 2, 2023

Bond Yields and Government Shutdown Fears Weigh on Stocks:

Last week proved challenging for stocks as rising bond yields and concerns about a potential government shutdown weighed heavily on market sentiment.
Over the last month, The Dow Jones Industrial Average returned –4.16%, while the S&P 500 returned –5.28%. The Nasdaq Composite Index returned –5.46%.

Source: Charles Schwab & Co, Inc.

Stocks Follow the Bond Market

The bond market drove stock prices for much of last week as investors fretted about rising bond yields. After beginning the week with small gains, stocks resumed their September decline amid weak housing data and a decline in consumer confidence. However, it was the jump in bond yields, which sent the 10-year Treasury yield to near a 15-year high, that may have most undermined investor sentiment.1
After a failed attempt at a rebound mid-week, stocks staged a Thursday rally on a pause in bond yield increases — a rally that extended into Friday morning on an encouraging core personal consumption expenditures (PCE) price index report (the Fed’s preferred inflation gauge). But, the rally faded as traders fixated on a potential government shutdown.
Stocks also reacted to news that the House of Representatives went into recess on Thursday, increasing the prospect of a government shutdown. The sell-off cooled on Friday, adding only incrementally to the week’s accumulated losses.

Mixed Economic Signals

Amid recent signs of a labor market cooling (a hopeful sign for ending rate hikes), last Thursday’s initial jobless claims report showed only a slight increase of 204,000. That was the second-lowest reading since January and below economists’ expectations of 215,000. Continuing claims declined by 12,000.2
That same morning, the final estimate of second-quarter GDP was released, indicating a 2.1 annualized growth rate — unchanged from the previous estimate. However, beneath the headline number, consumer spending was cut to a 0.8% rise from its earlier estimate of 1.7% — a worrisome revision since consumer spending is the engine of the U.S. economy.3

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1CNBC, September 26, 2023

2FX Street, September 28, 2023

3MarketWatch, September 28, 2023

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/.

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, September 25, 2023

Summer Ends on a Gloomy Note for Stocks:

Stocks suffered significant losses last week as rising bond yields and concerns about a possible government shutdown dampened investor sentiment. Technology stocks were hit especially hard, bearing the brunt of the retreat.
Over the last month, The Dow Jones Industrial Average returned –1.03%, while the S&P 500 returned –1.54%. The Nasdaq Composite Index returned –2.11%.

Source: Charles Schwab & Co, Inc.

Stocks Decline

Investor sentiment took a decidedly negative turn last week when investors were caught off-guard by the Fed signaling another potential rate hike this year, upending hopes that the Fed might finish its current rate-hike cycle.
Stocks declined sharply following the Federal Open Market Committee (FOMC) announcement and continued to fall the following day as bond yields spiked. The 10-year Treasury yield hit 4.48% on Thursday, touching its highest point in more than 15 years.1
Stocks also reacted to news that the House of Representatives went into recess on Thursday, increasing the prospect of a government shutdown. The sell-off cooled on Friday, adding only incrementally to the week’s accumulated losses.

Fed Signals Another Rate Hike

As expected, the Fed held interest rates steady but surprised many investors by signaling another rate hike before year-end and suggesting that rates may need to remain high through 2024. In his post-announcement press conference, Fed Chair Powell remarked the inflation battle would continue, and upcoming economic data would inform the FOMC’s future rate hike decision.
In their economic projections, 12 of 19 Fed officials expect to raise rates once more this year (the FOMC meets again on October 31-November 1 and again in December). The Fed also lowered their unemployment projection from their June estimate and revised their projection for annual core inflation to 3.7% in the fourth quarter, down from June’s 3.9% forecast.2

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1CNBC, September 21, 2023

2The Wall Street Journal, September 23, 2023

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/.

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, September 18, 2023

Stocks Hold Their Breath, Awaiting Fed’s Next Move:

Stocks closed last week with little change, as investors processed a combination of new economic data that presented a mixed picture.
Over the last month, The Dow Jones Industrial Average returned 0.58%, while the S&P 500 returned 2.06%. The Nasdaq Composite Index returned 3.17%.

Source: Charles Schwab & Co, Inc.

Stocks Searching for Direction

Stocks traded around the flatline without significant movement, lacking a catalyst in either direction. On Thursday, investors were encouraged by the European Central Bank’s indication that its rate-hiking campaign may be coming to an end, as well as a successful IPO that reinvigorated optimism in the capital markets. Investors also celebrated a strong retail sales report and a modest rise in core producer prices, overlooking a higher-than-anticipated headline number.
However, sentiment quickly reversed on Friday due to declining consumer confidence, troubling news in the semiconductor space, and a labor strike at the nation’s major automakers, sending major averages to a mixed close for the week.

Inflation Progress Stalls

Surging gasoline prices drove August’s inflation rate to its highest monthly rate this year, rising 0.6%, while the year-over-year Consumer Price Index posted a 3.7% increase, up from July’s 3.2% annual rate. Core inflation (excludes energy and food) was more encouraging, rising 4.3%– down from July’s reading of 4.7%.1
Producer prices also came in higher than expected, rising 0.7% in August, above the estimate of a 0.4% increase and the biggest monthly gain since June 2022. The year-over-year increase was a more modest 1.6%. Gasoline prices significantly contributed to the month’s jump; excluding food and energy, prices aligned with forecasts, ticking up 0.2% in August.2

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1Wall Street Journal, September 13, 2023

2CNBC, September 14, 2023

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/.

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, September 11, 2023

Fed Rate Hike Concerns and Rising Oil Prices Cast Shadow on Stocks:

Investor sentiment soured last week as concerns about the possibility of the Fed raising interest rates caused stocks to decline during a shortened holiday trading week.
Over the last month, The Dow Jones Industrial Average returned –1.53%, while the S&P 500 returned 0.38%. The Nasdaq Composite Index returned 1.82%.

Source: Charles Schwab & Co, Inc.

Stocks Resume Their Decline

Stocks were bedeviled by rising bond yields and higher oil prices last week, with technology shares bearing the brunt of the decline. Hopes that the Fed may not find it necessary to raise interest rates were dented by economic data reflecting higher prices, rising labor costs, and fewer-than-forecast initial jobless claims.
The inflationary implications of higher oil prices also contributed to the growing sense that the Fed may implement additional rate hikes. While bond traders generally still expect no rate hike in September, the likelihood of a 0.25% rate hike or higher in November jumped to 43.3% by Friday morning from 35.4% a week ago.1

Oil Prices Spike

Last week, Saudi Arabia and Russia announced they would extend their oil production cuts to the end of the year. Investors had expected these cuts to be stretched to October, so the three-month extension surprised the markets.
The announcement sent oil prices higher on supply shortage worries in the coming winter months, with the West Texas Intermediate (WTI) oil price climbing to a 10-month high.2
Higher oil prices also sparked concerns that it would make the Fed’s inflation fight more difficult, potentially forcing the Fed to hike rates above market expectations.

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1CME Group, September 8, 2023

2Reuters, September 5, 2023

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/.

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Relative Value: An Investment Approach for Navigating Stormy Seas

By Gary Aiken | September 7, 2023

One year ago, I published a note dedicated almost entirely to Jerome Powell’s speech at the Federal Reserve’s annual symposium in Jackson Hole, Wyoming. Chairman Powell’s comments were short and to the point. The Federal Reserve, under his leadership, was determined to snuff out inflation using all the tools at its disposal. He was determined to be remembered as the second coming of Paul Volker, who beat back the crushing inflation of the 1970s by taking interest rates into the high teens. In summary, Powell warned investors and those who live in the economy of the United States to expect pain.
And yet, a year later, even as the Federal Reserve has done exactly what the Chairman told us he would do, I doubt many would consider the past twelve months as significantly painful. The unemployment rate has remained low (3.8% for August) as Americans continue to find jobs and more rejoin the labor force. Real GDP growth has remained positive as consumers and the government continue spending. Although prices are still rising, the pace of inflation has slowed dramatically. The stock market, as represented by the S&P 500, is 16% higher today than it was at the end of August 2022, and the Intermediate Government/Credit Bond Index has managed to eke out a small 0.4% total return over the past twelve months. By these measures, it’s hard to reconcile the Chairman’s prescription for “pain” with what materialized.
Against that backdrop and maybe with a bit of humility and introspection, Powell turned from prophet of pain to poet in this year’s August Jackson Hole keynote. He waxed philosophically, “As is often the case, we are navigating by the stars under cloudy skies.” What do we, as investors, make of this circumspect and altogether humble public servant’s work and forecast? At Concord Asset Management, we have been upfront with our clients that although our base case is for a recession at some point, that doesn’t mean we are running for the hills.
Concord Asset Management invests client portfolios in a variety of different asset classes both directly and through exchange-traded funds (ETFs). We do not navigate by the stars. We have a framework for identifying attractive investments called “Relative Value.”
Relative Value is an approach to portfolio construction comparable to an optometrist visit. While pressing your face into a cold metal device, the optometrist asks, “Do you like A or B?  B or C?  One or two?  Three or four?” and so on. The world presents an array of data and investment choices. Investors can use that information to determine their view on the valuation of a security. But, unlike economists who apparently must use astrolabes and sextants, investors get one more crucial data point: the current price determined by market participants. We know exactly where we are at any given time and thus can compare the price and value of security A to security B and make a judgment about the relative merits of those two options.
Still, relative value analysis starts with our macroeconomic view. We must consider monetary policy, the direction of inflation and interest rates, fiscal policy, trade and geopolitics, currencies, commodities, and countries. Sometimes, we use important ratios to form our base opinions. For example, the difference between short-term and long-term interest rates has meaningful properties for describing the probability-driven outcomes of the future. When short-term interest rates are higher than long-term interest rates, as they are today, historical evidence suggests that a recession is likely to follow. When short-term interest rates are higher than long-term interest rates, the yield curve is deemed to be “inverted.”  The yield curve is not in its normal, upward-sloping shape.

A Normal Yield Curve is Upward Sloping

Source: Bloomberg Finance, L.P.

While the concept of an inverted yield curve is interesting, the important takeaway for investors is that this state of inversion is abnormal. Yield curve inversion is like a dissonant chord that must be resolved at some point. The resolution could be that short-term rates will go lower – a recession will eventually come, forcing the Fed to lower short-term rates quickly. Another resolution could also be that the Fed chooses to abandon, either publicly or effectively, its 2% inflation target. In this case, long-term interest rates would likely move higher to reflect higher future inflation expectations. Of course, there are alternatives in between and around these two extremes.
To discover relative value opportunities in this scenario, we analyze the two extremes. If a recession ensues, short-term rates will decline, inducing profits in short-term bonds. Further, in a recession defaults and distress increase. The highest quality bonds will be in greater relative demand than riskier junk bonds. Long-term rates will likely fall as inflation and real rates decline, meaning even greater profits for those willing to buy long-term bonds – whose primary thesis anticipates this particular outcome. In this scenario, investors at both the long and short ends of the yield curve will make money, but investors positioned at the long end will make more.
What if a recession is more elusive and inflation is resurgent or “sticky”? In that event, both short-term and long-term interest rates are likely to rise. Investors in the short end, with rates at current levels, may continue to make money even as short-term rates rise. They may find variable-rate bonds whose coupons reset higher along with interest rates. Our friends investing in long-term, fixed-rate debt will lose money quickly. Viewing this choice (Do you like “A” or “B”?) in this fashion, short-term, high-quality, and variable-rate bonds present value relative to intermediate and long-term fixed-rate bonds, and the bonds of the riskiest companies. That is how Concord Asset Management has positioned its clients this year, how we’ve framed our view in our 2023 Forecast and Halftime Reports, and how, until facts change, we will continue to invest.
It is likely that short-term interest rates will stay higher for longer in the face of persistent and sticky inflation. Chairman Powell remains committed to battling inflation through restrictive monetary policy. In our 2023 Halftime Report, we discussed the Fed’s favored inflation measure, Core Personal Consumption Expenditures (PCE). On the last day of August, this number was reported at 4.2%, well above the Fed’s target of 2%. So, interest rates will likely remain at their present level or move even higher until the effects of restrictive monetary policy have run their course.

Fed Policy is Restrictive

Source: Bloomberg Finance, L.P.

Just because we are risk-averse when it comes to fixed-income investing, doesn’t mean that we aren’t bullish when it comes to the stock market. Relative value in stock investing means comparing the prospects of U.S. stocks versus International Developed and Emerging Markets opportunities, then thinking about which sectors or trends are more favorable for investor prospects in both the short and long term. From this standpoint, we use relative value to determine our “overweight” and “underweight” positions.
At the beginning of the second half, we moved client portfolios to have about equal weight technology exposure. We thought that technology stocks had a terrific and somewhat surprising run in the first half of 2023, so we were rather cautious going into July and August. Still, we did not want to be underweight technology stocks because the long-term trends that make those companies attractive remain in place despite their seemingly high prices. At the same time, we thought energy stocks, which had been neglected during the year’s first half, were primed for a comeback in the face of oil prices gaining momentum. Finally, we continued to underweight banks and real estate as those sectors face challenges given the macroeconomic picture.
We are constantly reviewing these types of relative value sector and security positions. While our overall macroeconomic view is slow to change, markets are quick to reprice securities. Concord Asset Management strives to maintain a nimble approach to the securities in our client portfolios, taking gains when positions have grown too large (indicating their prices have climbed quickly) and buying positions we like when their prices have fallen.
Relative Value tends to have two positive side effects over the long run. First, it forces investors to act – buying low and selling high. Secondly, it restrains investors from unnecessary trading – introducing the discipline to let winners run and focus on tax efficiency. These two sides of the same coin emerge not because we are prescient, but because by looking at positions relative to other investment options, we are getting a fuller picture of the investment seascape. We allow the ship of our portfolio to rise and fall with the seas while course correcting when appropriate to stay in our risk tolerance lane and meet our long-term investment objectives.
I’ve purposefully returned to Chairman Powell’s nautical theme. It is hurricane season again on the East Coast of the United States. Despite the happy talk about “soft landings,” restrictive monetary policy is beginning to negatively influence segments of the economy. Some data points are starting to indicate growing stress on the U.S. consumer here at home, in Chinese real estate and business activity, and in near recessionary conditions throughout most of Europe. A tropical depression might be forming on the horizon – and it is unclear whether it will blow over quickly or develop into something more significant and pernicious.
The navigator on your financial journey is your Concord advisor. Having a plan, reviewing that plan, and working with your advisor during times of joy and stress are crucially important to your long-term investment success. I am honored to be working with incredible fiduciaries here at Concord Wealth Partners, who put our clients’ interests first. I appreciate the trust you’ve placed in me and my team.

Author

Gary Aiken, Chief Investment Officer

Gary Aiken is the Chief Investment Officer for Concord Asset Management and is responsible for macroeconomic analysis, asset allocation, and security selection as well as trading and investment operations.

Gary has over 21 years of investment experience and holds an undergraduate degree in economics from the University of Maryland and an MBA from The George Washington University School of Business.

—

Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Concord Asset Management, or any non-investment related content, made reference to directly or indirectly in this article will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this article serves as the receipt of, or as a substitute for, personalized investment advice from Concord Asset Management. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Concord Asset Management is neither a law firm, nor a certified public accounting firm, and no portion of this content should be construed as legal or accounting advice. A copy of Concord Asset Management’ current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/. Please Note: If you are a Concord Asset Management or Concord Wealth Partners client, please remember to contact the firm in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing, evaluating, and/or revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Concord Asset Management and Concord Wealth Partners shall continue to rely on the accuracy of information that you have provided. Please Note: If you are a Concord Asset Management or Concord Wealth Partners client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Tuesday, September 5, 2023

Economic Softness Sparks Market Optimism:

Falling bond yields, spurred by weak economic data, helped lift stocks to weekly gains as investors sought higher returns in equities. This development brought relief to market participants and contributed to the overall positive performance of stocks last week.
Over the last month, The Dow Jones Industrial Average returned –1.88%, while the S&P 500 returned -0.23%. The Nasdaq Composite Index returned 0.79%.


Source: Charles Schwab & Co, Inc.

Stocks Rise on Slowing Economy

Investor sentiment turned positive last week as signs of economic softness were interpreted as reason for the Fed to hold off on further rate hikes. A downward revision of Q2 economic growth and fresh signs of a cooling labor market reversed the recent rise in bond yield. They helped trigger a stock bounce back following Fed Chair Powell’s speech at Jackson Hole the previous Friday.
It wasn’t all about bad news being viewed as good news, though. A series of solid earnings reports, an announcement by one mega-cap tech name introducing pricing for its AI tools, and fresh inflation data — in-line with market expectations–further boosted enthusiasm for stocks.

Labor Shows Signs of Cooling

Despite historic monetary tightening, the labor market has exhibited remarkable resilience, but last week’s employment data showed a cooling trend.
Job openings declined to their lowest level since March 2021, though they remained above pre-pandemic levels. Meanwhile, a survey of private sector hiring showed a slowdown in hiring, with employers adding 177,000 jobs in August–below the 371,000 added in July and short of economists’ forecast of 200,000.1,2
Finally, the government’s monthly employment report showed the number of nonfarm payroll gains continued to decelerate in August, while June and July estimates were revised lower by 110,000.3

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1The Wall Street Journal, August 29, 2023

2CNBC, August 30, 2023

3The Wall Street Journal, September 1, 2023

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/.

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, August 28, 2023

Stocks Retreat as Powell’s Hawkish Talk Rattles Markets:

Last week, stock markets remained volatile, influenced by unpredictable bond yields and more headline news. However, markets ended the week on a positive note after Fed Chair Jerome Powell’s remarks regarding the monetary outlook.
Over the last month, The Dow Jones Industrial Average returned -2.31%, while the S&P 500 returned –2.66%. The Nasdaq Composite Index returned –4.17%.

Stocks Manage Gains

Stocks rallied on Monday on upbeat sentiment over the earnings release from a mega-cap semiconductor company scheduled for mid-week, only to see that momentum fizzle the following day on weak retail earnings and a credit downgrade of a handful of banks.
Stocks resumed their rally on weak economic data, which fueled hopes for future Fed dovishness. They also rose on expectations that earnings from a leading AI chipmaker would validate the AI narrative that propelled markets in the second quarter. Despite a blowout earnings report, stocks turned lower as investor attention quickly switched to Fed Chair Powell’s presentation scheduled for Friday.
After some initial jitteriness, investors responded well to Powell’s comments, posting gains to close the week.

Powell Stands Firm

Powell spoke on Friday at the Fed’s annual economic symposium in Jackson Hole, asserting that, despite considerable progress, inflation remained too high and additional rate hikes may be on the horizon. He acknowledged that previous rate increases had not yet thoroughly worked their way through the system, so caution about further hikes was needed.
Investors reacted to Powell’s comments far better than in August 2022, when a hawkish presentation sent stocks lower. Powell also addressed a growing feeling among investors that the Fed may eventually raise its inflation target to 2.5-3.0%. Powell rejected this idea unambiguously, stating that the two percent target would remain the Fed’s inflation goal.

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/.

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, August 21, 2023

Markets Weather the Storm of Economic News and Indicators:

Last week, stocks continued their August decline as investor sentiment turned negative due to higher yields and disappointing economic data from China.
Over the last month, The Dow Jones Industrial Average returned -2.44%, while the S&P 500 returned -3.48%. The Nasdaq Composite Index returned –4.65%.

Stocks Wilt

Rising bond yields, driven primarily by strong economic data and the release of the minutes from July’s Federal Open Market Committee (FOMC) meeting that pointed toward Fed officials’ potential need to raise rates further, weighed on stocks throughout the week.
In a week of light trading typical of August, stocks were additionally buffeted by a string of economic data that painted a flailing economic recovery in China and warnings of potential downgrades of dozens of U.S. banks by Fitch, a credit-rating agency.
After the 10-year Treasury yield rose to its highest level since October 2022 on Thursday, yields eased on Friday, helping to arrest the week’s downward trend.1

Retail Sales Surprise

Retail sales jumped 0.7% in July, the fourth-consecutive month of increasing consumer spending on goods. The report supported the growing narrative that the U.S. may be able to avoid a recession in the near term. The strong spending data, supported by a robust labor market, also may have placed the Fed in a more difficult position in trying to bring inflation down to its target rate without more rate hikes.2
Consumer spending was higher in most categories, including bars and restaurants, grocery and hardware stores, and back-to-school items like books and clothing. Sales of autos and electronics fell, a possible consequence of higher borrowing costs.2

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1CNBC, August 18, 2023

2The Wall Street Journal, August 15, 2023

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/.

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.