Stableford Market Commentary August 2023

Have soft-landing expectations peaked? 

Equities fell 4.9% at the August low before rebounding to close down 1.9% for the month. It seems that expectations finally got so high that the market was unable to meet them. This is a significant change of sentiment. Since the March bank bailout expectations have been that the Fed would pause soon and engineer a softlanding for the economy. This allowed valuations to expand and stocks to rise despite lower earnings expectations.  

Line graph of the SPX Index in black
Exhibit 1 – Equities Fall 4.9% Before Rebounding to Close Down 1.9%


However, someone threw a wrench in the gears during August. Even Nvidia—poster child for AI—wasn’t able to meet earnings expectations despite blowout second quarter numbers beyond even the highest estimates. Perhaps it is a sign that the winds are changing, we’ll see.

Rates are also pressuring equities, up appreciably since June and hitting 4.35% for the 10 Year US Treasury during August before closing the month at 4.11%. This despite slowing inflation and a potential Fed pause.

Black line graph of Bond Yields
Exhibit 2 – Bond Yields Up 15 Points In August to 4.11%


Is this the peak in soft-landing expectations? It seems like it. Labor data is softening with fewer jobs being added and unemployment rising. Credit card and auto delinquencies are on the rise as well. This doesn’t mean that they have to continue to worsen, but it seems there are fewer prospects for potential upside surprises in the future: Fiscal spending has been strong for a while and would be difficult to increase given a divided Congress, real rates are high, and the Fed shows no signs of cutting rates soon.  

On the other hand, earnings expectations have not dropped much. Perhaps there is a buying opportunity in the wings.  

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This market commentary was written and produced by Stableford Capital, LLC. Content in this material is for general information only and 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 in directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

S&P 500 INDEX: The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Justin Thomas
Justin Thomas, CPA has worked for over 15 years as a portfolio manager and analyst managing institutional assets for hedge funds and large financial institutions. He has a MBA and Masters in Accounting from Northeastern University and an undergraduate degree in Economics from Tufts University. Justin is a managing partner at Stableford Capital.

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