Stableford Capital Insights
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 soft-landing for the economy. This allowed valuations to expand and stocks to rise despite lower earnings expectations. [caption id="attachment_4162" align="alignnone" width="1335"]
![Line graph of the SPX Index in black](https://cdn.prod.website-files.com/6683b01ac073e8ac0a368ef0/6683b01ac073e8ac0a3693cd_Exhibit-1-Equities-Fall-4.9-Before-Rebounding.jpeg)
Exhibit 1 - Equities Fall 4.9% Before Rebounding to Close Down 1.9%[/caption]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.[caption id="attachment_4161" align="alignnone" width="1339"]
![Black line graph of Bond Yields](https://cdn.prod.website-files.com/6683b01ac073e8ac0a368ef0/6683b01ac073e8ac0a3693ce_Exhibit-2-Bond-Yields-Up-15-Points-In-August-to-4.11.jpeg)
Exhibit 2 - Bond Yields Up 15 Points In August to 4.11%[/caption]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. Please call with any thoughts or questions
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