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Stock Market Declines as Bond Yields Rise

Stock Market Declines as Bond Yields Rise

October 24, 2023

There was a rather sharp drop in the stock market last week leading to new lows for the current pullback which began on July 27th. Most analysts point to rising bond yields as the catalyst for the market sell off.

Throughout much of 2022 we saw rising bond yields occur at the same time the stock market was dropping, which led to poor returns for two of the biggest investment classes. Higher bond yields also lead to higher mortgage rates which then dampen the real estate market. These scenarios were likely outcomes when the federal reserve began aggressively raising interest rates 18 months ago. While seeing all this negative economic news, it’s a relief to know there are unexpected positives also occurring in the economy to balance things out. Consumer spending is robust, unemployment remains extremely low, and 3rd quarter earnings are coming in better than forecasted. Will the positives be enough to kickstart a prolonged rally in the 4th quarter?

Whether the stock market rallies sooner (this quarter) or a little later (in 2024) is less important than the opportunity to act now to better your chances for above average returns. Contributing to your investment account while the stock market is down will set you up for future success. The current market pullback is very old at 63 trading days, and it won’t stay down forever. When a pullback bottoms and begins it’s rebound to previous highs it climbs, on average, at a significantly faster pace than at any other time (aside from immediately after a bear market bottom). I believe this is a great time to buy into the stock market to achieve better long-term returns. Contact me to discuss how you can take advantage of this buying opportunity before it passes.

Photograph by: Brandon Wong on Unsplash´╗┐

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