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By Tony Jasinski
November 01, 2023
Investment Management

Portfolio Manager Commentary

November 1, 2023

The Portfolio Manager Commentary is provided by Trustmarkโ€™s Tailored Wealth Investment Management team. The opinions and analysis presented are accurate to the best of our knowledge and are based on information and sources that we consider to be reliable and appropriate for due consideration1.

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Economic Outlook

U.S. Industrial Production was up 0.30% in September after having been flat in August. Capacity Utilization was a reasonably strong 79.7%. Retail Sales were up 0.70% in September after having been up 0.80% in August. The Index of Leading Economic Indicators was down 0.70% in September versus having been down 0.50% in August. The PCE Deflator (a measure of inflation) was up 0.36% for September and up 3.40% year over year. The Chicago Purchasing Managers Index was still in contractionary territory at 44.0 for October, which was relatively flat versus September. The University of Michigan Sentiment data came in at 63.8 for October versus 63.0 for September. Finally, New Single-Family Home Sales came in at a 759,000 unit level in September versus a 676,000 unit level for August.

Fixed Income

The U.S. Treasury Yield Curve remains inverted, however this inversion has begun flattening somewhat, with the 10-year yield at 4.51%, 36 basis points below the 2-year yield of 4.87%. The U.S. Treasury Yield Curve has now been inverted for 15+ months. At its recent September meeting, the FOMC left the Federal Funds target rate range at 5.25% - 5.50%. The FOMC kept rates in this band in its October/November meeting. The three-month and six-month U.S. Treasury Bills currently yield in a range of 5.40%-5.49%, which is within the range of the FOMCโ€™s current Fed Funds rate target.

Yield Curve

U.S. Treasury Yield Curve

Current Generic Bond Yields

Current Generic Bond Yields

Equity

US equity is down for the month as the S&P 500 index falls -2.17% and, by definition, enters correction territory with the large cap index dropping more than 10% from their July peaks. The narrative continues to be surrounded by the unrelenting rise in Treasury yields, the market coming to grips with the idea of a higher for longer Fed rate, and geopolitical uncertainty. Though stocks have had a history of looking past geopolitical events, the possibility that the situation could swell continues to be an overhang for the market (Factset Research Systems).

Overall market breadth continues to struggle as the equal-weighted S&P 500 is down -2.44% year-to-date, 13.03% less than the cap-weighted S&P 500 (+10.59%). Technology (+32.63%) and Communication Services (+35.72%) continue to lead as Utilities (-13.14%), Health Care (-7.17%), and Staples (-7.16%) vastly lag the market.

Index Returns
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1Sources of statistical information are Bloomberg, Factset Research Systems, and Ned Davis Research. Non-deposit investment products are not insured or guaranteed by any government agency or government sponsored agency of the federal government or any state; are not deposits, obligations, or guaranteed by Trustmark National Bank or its affiliates; and are subject to investment risks, including the possible loss of principal. The opinions and analysis in this report are accurate to the best of our knowledge and are based on information and sources that we consider to be reliable and appropriate for due consideration. The volatility of market conditions and any change from the basic set of assumptions used herein could lead to substantial differences in the projected results and conclusions in this report. All projections, prices and assumptions herein are subject to change without notice. We do not guarantee the results, performance or liquidity of the securities discussed and any strategy or investment selection remains your responsibility. This report is strictly for information purposes and is not intended as an offer or solicitation for any transaction. Tailored Wealth Investment Management is a division of Trustmark Wealth Management.