As we fall into October, it’s clear that this is a time of both challenge and opportunity. Recent events, from the devastation caused by Hurricane Helene to the Federal Reserve’s anticipated rate drop, are reshaping the landscape in ways we can’t ignore.
But before we get into it … here’s a snapshot of the markets in September.
September Market Recap
September can best be described as a whole lot of action, with not a lot of actual result. For example, the S&P 500 declined 5% towards the beginning of September and was then following a strong rally (following the Federal Reserve’s announcement of a Fed Funds rate cut). With the drop and the strong rally, the index ended up about 1% for the month. The volatility will likely continue, at least through the election – but probably even longer.
Given the many mixed messages in the market (inverted yield curves, Fed Funds rate cuts, home price declines in some areas, etc) it is easy to want to make rash decisions. This is why it is so important to have a system that has been tried, and the courage to follow it. Since July we have been in our base allocation of stocks and bonds. We did not reduce stock holdings early in September when things dropped and we did not increase risk when the market rallied as Jerome Powell’s announcement. We have instead continued to follow our system and we will continue to follow that path through the almost certain volatility of the coming months.
Base allocations of all asset classes have remained the same throughout September.
U.S. Large Cap Equity
U.S. Large Cap Growth Equity
U.S. Small Cap Equity
International Equity Developed Markets
International Equity Emerging Markets
U.S. Bond Market
“The human spirit is stronger than anything that can happen to it.”
– C.C. Scott
First and foremost,
Our hearts are with the communities in Western North Carolina who have been devastated by Hurricane Helene. The destruction has been overwhelming—entire towns have been wiped out, and many are without power, water, and essential resources. But amid the devastation, we are witnessing something powerful: communities banding together to provide perilous rescue support, collecting and delivering water and food, and showing unimaginable compassion and selflessness. In times like these, we are reminded of what home and community truly mean to us.
Our firm has deep ties to this region – our Managing Member, Blaise Stevens, is a proud graduate of Western Carolina University and continues to be actively involved in the community. Many of our clients, friends, and family members have been directly affected by this disaster. The strength we see emerging from these communities is a powerful reminder that we are always stronger together.
Drop it Like it’s Hot:
The Federal Reserve recently made headlines with a significant rate drop, a move aimed at supporting economic stability during uncertain times. While such changes can create immediate impacts on savings rates and borrowing costs, they also open up opportunities for investors. For instance, lower interest rates often lead to lower mortgage rates, making it a potential time to consider refinancing or real estate investments. For borrowers, it’s a chance to lock in lower rates, reducing long-term costs on major purchases.
However, it’s not just about real estate. Lower rates may also influence investment strategies, particularly for those seeking income-generating assets. Traditional savings vehicles like bonds may offer reduced yields, leading investors to explore alternative strategies to maintain income while preserving capital. We are closely monitoring these shifts to help you navigate this changing landscape, ensuring that your portfolio remains resilient and aligned with your long-term goals.
Election Jitters:
Election years often bring increased market volatility as investors react to the potential for changes in government leadership and fiscal policy. It’s natural to assume that the political party in control might have a significant impact on market performance, but interestingly, data suggests otherwise. According to an analysis by Investopedia, the political party in power—whether controlling the presidency, Congress, or both—doesn’t consistently determine market direction.
The stock market, represented by the Dow Jones Industrial Average (DJIA), has performed both positively and negatively under various combinations of party control. For example, under unified party control—where the president’s party also controls both houses of Congress—the market has seen periods of growth, such as during Joe Biden’s early presidency, when the DJIA increased over 17% from October 2020 to March 2021. However, under a similar unified government during Barack Obama’s first term, the DJIA fell due to the 2008 financial crisis.
Even during periods of divided government, where control of Congress is split or held by the opposition party, the market has often performed well. For example, during George H.W. Bush’s presidency in 1990, the DJIA climbed 16% despite Democrats controlling both houses of Congress.
The key takeaway is that while elections may influence short-term market movements, the specific political party in power seems to have minimal long-term effect on stock market performance. This reinforces the importance of staying focused on long-term investment strategies rather than reacting to political events. As always, our trend-following approach allows us to navigate the ups and downs of election-year volatility by identifying enduring market trends, rather than being swayed by short-term disruptions.
Source: Investopedia, “Do U.S. Election Results Influence the Stock Market?” https://www.investopedia.com/us-election-and-stock-market-6822056
In times of uncertainty—whether caused by natural disasters, economic shifts, or political events—it’s crucial to stay focused on long-term fundamentals. The Federal Reserve’s recent rate drop and election-year volatility may cause short-term disruptions, but they also present growth opportunities. Our trend-following strategy allows us to align with enduring market trends while avoiding reactive decisions. By maintaining diversification and discipline, we position your portfolio to capitalize on long-term opportunities and manage risks, ensuring your financial goals stay on track despite the volatility.
As we move forward, remember that resilience, community, and careful stewardship of your investments are key to weathering any storm. We are here to guide you through these uncertain times with confidence and clarity, ensuring your portfolio is built for success today and tomorrow. If you have any questions or concerns, don’t hesitate to reach out to us.
Thank you for your continued trust.
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