September 2022 in Review

by Daniel Zeigler, CFP®, CMFC®, Senior Portfolio Manager

Welcome to the monthly market update from Midland Wealth Management. I am Dan Zeigler, Senior Portfolio Manager. Today I just wanted to take a few minutes to give you an update on the markets for the month of September and for the 3^rd quarter.

The month of September led up to its reputation of being one of the most volatile months of the year for the stock market. The beginning of the month did find some stability, only to be trumped by Jerome Powell’s speech from Jackson Hole and September consumer inflation that came in higher than expected. The S&P 500 ended the month down three straight weeks and the S&P 500 has now fallen for three consecutive quarters, which hasn’t happened since 2009. The index was down 9% for the month and now is down 24% for the year.

The Federal Reserve is pulling out all the stops to try and reduce the inflation rate and appear to be continuing their path for higher rates and will do whatever it takes to bring down the prices and inflation. The Fed has now raised their key fed funds rate by 75 basis points in each of the last three meetings, as the rate is now targeting 3-3.25%. The Fed foresees its policy rate rising at a faster pace and to a higher level than expected, with a year-end target of around 4.25%, which was higher than investors had anticipated.

It has been an extremely volatile year for stocks, however, bonds have experienced their most devastating period since at least 1926. When the Federal Reserve increases rates, bond yields rise and prices fall. Going forward, bond investors should begin to see some relief when interest rates stop rising and bond investors can collect more income in the future. The safe haven 1-year Treasury bill is now yielding close to 4% and many money market funds are now yielding close to 2.60% and climbing. To put this in perspective, at the beginning of 2022, the 1-year Treasury bill was around 0.40%.

It's important to remember that the equity market is not the economy, and the market typically looks forward by 6 to 7 months. Therefore, many of the uncertainties that we are experiencing today are already being priced into the stock market. It is extremely important for investors to take a step back during these volatile times and remind themselves of their long-term goals. Unfortunately, it is virtually impossible to time the bottom and if investors decide to sell, they typically miss out on future returns when the market begins to stabilize. Historically, the average bear market has lasted around 20 months and has experienced declines of around 30-40%. Currently, we have been in a bear market for most of this year and the S&P 500 is down around 24%.

As we wrap up the year, the last quarter will certainly be busy as investors will get clarity on the mid-term elections, additional inflation numbers, two more Federal Reserve meetings, and upcoming 3^rd quarter corporate earnings results.

Our Investment team continues to monitor all economic data and make tactical adjustments in all asset classes as we continue to assess the risk and look for long-term opportunities. We continue to be long-term investors in this market and investors should continue to stick to an appropriate diversified long-term investment strategy.

As always, if you have any questions or want to speak to someone, please do not hesitate to reach out to us. Thank you and I hope everyone has a great day!