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Stocks Retreat in the Face of Rising Rates and Oil Prices…

Dumaine Investments Weekly Market Update – September 6, 2023

• Having finished August with a slight rally on optimism about a Fed pause, US stocks resumed their pullback in the first week of September. Rising Treasury yields, a strong dollar, and an extended rally in crude oil prices have continued to serve as headwinds to a market priced for perfection. After briefly falling below 4.1% at the end of August, the 10-year Treasury yield is again approaching its recent 15 year high of 4.3%, while WTI crude oil had been holding firm above $86/barrel.

• The CME Fedwatch tool is now forecasting a 90%+ probability of a pause at the September Fed meeting. While recent economic data have been mixed, markets appear to expect the Fed to abstain from raising rates due to figures suggesting a softening picture for the labor market and manufacturing, including a higher-than-expected August unemployment report.

• WTI crude oil prices have accelerated sharply in the last few weeks – you would have to turn the clock back more than a year to June 2022, to find petroleum prices so elevated.

• The renewed advance in the US dollar is raising concern in Asian countries as their currencies fell to multi-month lows, prompting policymakers in Japan and China to step up defense of their beleaguered exchange rates. Japan issued its strongest warning in weeks against rapid declines in the yen while China’s central bank also offered forceful guidance regarding its targeted rate for the yuan as the currency weakened toward a level not seen since 2007.

DISCLAIMER: The information provided in this blog post is for informational purposes only and should not be construed as financial advice. Investment decisions should be based on individual financial goals, risk tolerance, and consultation with a qualified financial professional.