The Change-up 10.23.2023: Mr. Market

Happy Monday!

I hope you enjoy this edition of The Change-up, my weekly newsletter sharing the latest market news and personal finance tips. If you're interested in learning more about working with me, send me a message or click my Calendly link at the bottom.

Please feel free to forward it along to friends!

Quote of the Week

"Courage is grace under pressure" - Ernest Hemingway

The Story

After starting off on a positive note, markets slid as we moved through the week, having trouble balancing strong earnings reports with the conflict in the Middle East. The DJIA is now negative for the year. Oil prices remain under $90/barrel. And the 10-year treasury yield is now close to the 2-year yield. More on that below.

My View

When markets are working as they should, the 10-year treasury yield should be higher than the 2-year treasury yield.

Why?

If you're loaning money to someone, you expect to receive a greater rate of return for locking your money up for 10 years vs 2 years. A lot more could happen in 10 years than in 2 years, and you should be compensated for that uncertainty.

But in the middle of 2022, the interest rates flipped. A 2-year treasury was yielding more than the 10-year treasury. We call this an inverted yield curve, and it usually happens before a recession. In June of this year, the 2-year treasury was paying more than 1% higher interest than its longer-term counterpart.?

Now, the yields seem to be regulating. The current difference is only 0.14%, with the 10-year treasury closing fast.?

What could it mean for you?

First, it gives fixed-income investors a better opportunity to put money to work long-term.?

Second, if investors pull out of the stock market and move to long-term fixed-income securities, it would negatively impact stock prices.

Last, it could continue to tighten the economy. Higher treasury rates correlate to all kinds of interest rates, including auto loans, mortgages, and even credit card rates.?

We're certainly in the middle of a weird economic time, but there is a lot of value to be found if you look for it.?

Coming Up This Week

• Q3 Earnings Season (All week)
• Q3 GDP (Thursday)

In 1949, Benjamin Graham wrote a book titled The Intelligent Investor. Graham's book has gone on to become one of the most popular books on investing and includes a rave review from Warren Buffet.

In the book, Graham shares the idea of Mr. Market.?

To understand Mr. Market, we must first understand what investing should look like and what it shouldn't look like.

Investing in a stock is purchasing a business with strong fundamentals that just so happens to trade on a stock exchange.

It isn't gambling on a stock that could or couldn't go down over the next week because of macro events.?

Once we buy a piece of a company, we enter into a partnership with Mr. Market.

And Mr. Market is emotional, irrational, and a borderline maniac.?

Sometimes, Mr. Market will have a bad day and want to sell you his equity for less. Sometimes, he's feeling really good and will want to pay you a premium for your ownership stake.?

As investors, our job is not to follow Mr. Market's emotions and sell when he sells. Our job is to take advantage of Mr. Market when he is being irrational.?

Let's have a week!

?

Reply "Unsubscribe" to be unsubscribed from this newsletter

?

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. McCall & Associates is not a registered broker/dealer and is independent of Raymond James Financial Services.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate to complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Austin Coley and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.?

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as "The Dow", is an index representing 30 stocks of companies maintained and reviewed by the editors of the Wall Street Journal. The NASDAQ Composite Index is an unmanaged index of securities traded on the NASDAQ system. Keep in mind that individuals cannot invest directly in any index, and index performance doTes not include transaction costs or other fees, which will affect actual investment performance. Individual investors' results will vary. Past performance does not guarantee future results.?

This is not a recommendation to purchase or sell the stocks of the companies pictured/mentioned.

The 10-year Treasury note is a debt obligation issued by the United States government with a maturity of 10 years upon initial issuance. A 10-year Treasury note pays interest at a fixed rate once every six months and pays the face value to the holder at maturity.

Mortgage rates are determined by a combination of market factors such as overall economic health and personal factors such as your credit score, how you occupy your home and the size of your loan compared to the value of the property you're purchasing.?

Raymond James Financial Services and your Raymond James Financial Advisors do not solicit or offer residential mortgage products and are unable to accept any residential mortgage?loan applications or to offer or negotiate terms of any such loan. You will be referred to a qualified Raymond James Bank employee for your residential mortgage lending needs. Raymond James Financial Services, Inc. does not provide advice on mortgages.?

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP?, CERTIFIED FINANCIAL PLANNER?, and CFP? (with plaque design in the United States, which it authorizes use of by individuals who successfully complete CFP Board's initial and ongoing certification requirements.?

Every investor’s situation is unique and you should consider your investment goals, risk tolerance, and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your situation.

U.S. government bonds and Treasury bills are guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and guaranteed principal value. U.S. government bonds are issued and guaranteed as to timely payment of principal and interest by the federal government. Treasury bills are certificates reflecting short-term (less than one year) obligations of the U.S. government. There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise.

You should discuss any tax or legal matters with the appropriate professional.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members

?

?

?

?

?

?