Market Sell-off Continues | The Investors Edge

By John Stewart, chief investment officer at Farmers Trust Co.

Week in Review: Market Sell-off Continues

Stocks (and bonds actually) continued their sell-off that began in August this past week, taking out their early-October lows after a brief recovery effort earlier this month.

Last episode, I mentioned that changes to forward earnings estimates would be a key metric to watch as companies started to report their third quarter profit numbers.

Unfortunately, those earnings estimates for the next two quarters are starting to take a turn for the worse as companies are being a bit cautious in their forward outlooks.

This is likely a result of a combination of continued price pressures and higher interest rates squeezing margins, as well as concerns over geopolitical impacts and the potential for a slowing consumer as excess savings and borrowing capacity get tapped out.

Bulls are still hoping for a late fourth quarter rally, which has some precedent given that November and December are two of the strongest months for stocks, on average. There are always exceptions, however, and conservative investors should tread lightly.

Featured Insight: Never Stop Learning

It may seem obvious to talk about the idea that you should never stop learning when it comes to investing. This is obviously true when it comes to most everything in this world.

Nevertheless, it is important to remember sometimes because it can be easy to get set in ones ways and become too comfortable with ones approach to making investment decisions.

It is this complacency that usually precedes the market throwing you a curveball. Markets are always changing and evolving. As soon as you think you have the game figured out, it changes.

Sure, there are some principles that stand the test of time, and should never be forgotten, but don’t let that stop you from reading everything you can get your hands on. Find different perspectives and constantly be challenging your assumptions.

This is part of what makes investing fun. If you don’t love to learn, you’ll probably not enjoy it, and it’s even less likely you’ll be very good at it.

Looking Ahead: Fed on Deck

Yes, the next Fed meeting is upon us, yet again.

In all likelihood, there will be no change in their policy Fed Funds rate, which currently sits in a range of 5.25% to 5.50%.

Investors will be keying on the Fed’s expectation for further rate increases (and/or cuts) looking out to next year.

We expect that the Fed is likely done hiking rates for this cycle. We would also caution that longer-term rates may still rise even if the Fed leaves short-term rates alone.

It’s important to remember that the market has a lot of control over interest rates as well, not just the Fed. The Fed could easily CUT its short-term rate target next year and see long-term rates RISE. Few investors are well prepared for that possibility.

Copyright 2023 The Business Journal, Youngstown, Ohio.