Rise Together

Volatile September

Coming into the month of September, we talked about how it’s usually the most volatile month of the year, and history repeated itself as the S&P 500 was down over 5% for the month. One of the biggest drivers of the volatility in September was due to rising interest rates as the 10-year treasury yield rose from 4.1% to end the month up to 4.57%. The rise in yields occurred partly due to expectations that the Federal Reserve will keep rates higher for longer. So, while the fear around higher rates has spooked the markets in the near term, stocks and interest rates usually rise together over time. Interest rates and stock valuations tend to be inversely correlated. While that relationship tends to hold for shorter periods at elevated rates, the S&P 500 Index tends to rise throughout sustained periods of rising interest rates. Looking at rising rates from the early 1960s through this year, only three of the fourteen periods of rising rates led to lower stock returns. The return through these periods shows that the market has averaged 16.3%. So yes, rising rates lead to short-term volatility, but stocks and rates usually rise together over more extended periods. Even if rates stay high or go higher, it doesn’t mean stocks will stay down.


2007 vs. 2023

In this episode, Ty Miller shows a chart that maps out where we were in 2007 to where we are now. The year 2007 is relevant because that was the last time the 10-year Treasury yield was over 4.5%. We have come a long way since then. The S&P 500 was at a price of 1,541, and now it’s over 4,200. In the chart, you can see the similarities in oil, which was $87 a gallon and is now $91. In 2007, Bitcoin didn’t exist, of course. The largest weighting was Exxon, and now the largest stock is Apple. It’s always interesting to go back in history and see that we have made this big circle in terms of yields and what that looked like in 2007.


Government Shutdown

We spent all weekend getting ready to talk about a government shutdown, and lo and behold, the unexpected averting of a shutdown has happened as the government was able to work out a deal. The headline we are seeing is saying that Congress has, for now, averted the shutdown. We think this is most likely a 45-day thing, at least. It could go longer, but it puts that hold on for 45 days at least. It was very unexpected as the odds of the Government shutdown were approaching a near certainty, but they were able to get a bipartisan package through. The legislation includes $16 billion of disaster aid, excluding border funding and Ukraine aid. We think the next step here is that Speaker McCarthy’s speakership will be a little challenged. Right now, that’s just speculation based on everything that has happened. Not everyone was for this deal, but enough people were to get it through. Typically, stocks are not correlated at all with government shutdowns. History has shown some up years and some down years during shutdowns. GDP growth has very little correlation as well. As far as that goes, we have a lot more up years than down years. Each government shutdown is a little different. Right now, we have many workers on strike, along with higher gasoline prices. Consumer aid is rolling off, and consumers are picking up on student loan payments. Typically, while looking at these things, while they are a lot of headline risk, the actual results don’t necessarily match the headline risk. So, that’s something to keep in mind.



Greg Powell, CIMA®
President and CEO
Wealth Consultant
Email Greg Powell here

Bobby Norman, CFP®, AIF®, CEPA®
Managing Director
Wealth Consultant
Email Bobby Norman here

Ty Miller
Associate Vice President
Wealth Consultant
Email Ty Miller here

Fi Plan Partners is an independent investment firm in Birmingham, AL, with a team of professionals serving clients across the nation through financial planning, wealth management and business consulting. The team at Fi Plan Partners creates strategies in the best interest of their clients using fee based investing.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Economic forecasts set forth in this presentation may not develop as predicted.

No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.

Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.

Cryptocurrencies are not legal tender and are not government backed. Cryptocurrencies are non-traditional investments, resulting in a different tax treatment than currency. Federal, state or foreign governments may restrict the use and exchange of cryptocurrency.

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