27 September 2023 - Thoughts on the Market

In my August update, I outlined a broad macroeconomic forecast which, for the most part, I still like. First and foremost, I warned of a sharp spike higher in the 30-year US treasury interest rates. This is playing out pretty much as expected. Rates have shot up from 4.16% to 4.78%, nearly a 15% move, and the bonds trade like there is still more to come. I wrote that we might see the yield reach 5.3%, and I stick with that call.

I also warned that the stock markets were nearing a significant top, and they are now showing some serious signs of cracking. The Nasdaq has dropped about 8.7% from the recent highs in July, and it feels like this could be the start of something much bigger. For the first time all year, both good news and bad news are leading to stock market weakness. This is pretty much what I was anticipating, and I see no reason this paradigm can’t continue.