Trader’s Insight: Walking Gingerly into October

The final quarter of 2023 has arrived. Following September’s slump, markets are down over 7 percent from their recent peak.

Typically, some seasonal weakness in the fall is normal. Traders generally expect markets to tick higher this month, as well as rally into the end of the year. This year, things may be a bit different given the unique conditions right now.

September’s Federal Reserve meeting hammered home the idea that markets may need to stay higher for longer. That’s led to a surge in bond yields. The bond selloff is also weighing on stocks.

Many interest-rate sensitive stocks such as utilities and real estate plays have taken a dive in recent sessions. That may be due to the higher yields now offered on bonds.

Why risk a 3-4 percent dividend in a highly indebted company, when the risk-free yield is now at 5 percent?

October also marks the resumption of student loan payments.

That could lead to slowing consumer spending in the months ahead. When borrowers have to start repaying loans, there’s less cash flow available to spend in other parts of the economy.

In the plus column, the government avoided a shutdown going into the month. That could have also weighed on the economy over time, and could have pushed markets lower.

Overall, markets will likely remain volatile in the coming weeks.

To read the full analysis, click here.