Equities React To Congressional Uncertainty – Global Equity Overview

Domestic equities saw mostly negative returns in September, as stocks retracted further with shutdown concerns increasing towards the end of the quarter. Rising interest rates and labor union strikes contributed to market anxiety, as uncertainty drove volatility higher throughout the month.

The energy and communication services sector were the only positive sectors for the third quarter. Elevated fuel prices and improved technology earnings supported the rise in the sectors. Pessimism amid renewed inflation concerns hindered broad equity momentum during the quarter.

Developed and emerging foreign market equities also pulled back in September as uncertainty surrounding the U.S. dollar and elevated fuel prices drove valuations lower.  (Sources: S&P, Dow Jones, Nasdaq, MSCI, Bloomberg)

Yields On The Rise – Fixed Income Overview

Looming government shutdown threats pressured bond markets as concerns regarding heightened funding costs for the government came into focus. Yields on U.S. Treasury bills, notes, and bonds rose in September as the odds of a federal budget compromise diminished. Analysts expect the rise in government debt yields to be temporary unless Congress reaches an impasse mid-November budget deliberations. The yield on the 10-year Treasury bond surpassed 4.5% at the end of September, luring investors away from equity volatility. (Sources: Treasury Dept., Congress.gov)

Consumption Decreases As Environment Changes – Economic Dynamics

Over 65% of the country’s economic growth, as measured by Gross Domestic Production (GDP) is driven by consumers. Sentiment and confidence are critical components to consumer spending behavior, influencing spending patterns and habits. Recently released data from the Bureau of Economic Analysis reveals that consumers are spending less than they have been.

Factors affecting consumer spending include income, sentiment, job status, and confidence. As consumers perceive changes in their economic situation, they tend to modify spending to accommodate those perceptions.

When retail stores and restaurants began to reopen in 2021, consumers were ready to spend funds that had been sitting idle for nearly a year. Consumer consumption fell dramatically in April 2020, as stay-at-home mandates and retail closures went into effect, only to elevate to new highs in April 2021 once consumers were able to spend freely again. The most recent data trends confirm that consumers are spending less and perhaps with greater caution as economic uncertainty takes hold. (Sources: Labor Dept.,BEA)

Medicare Coverage Heading Into 2024 – Retirement Planning

With open enrollment upon us, millions of Americans will be deciding on which, if any, changes to make to their Medicare coverage. The Open Enrollment Period for 2024 coverage is from October 15, 2023 to December 7, 2023. Coverage for any changes or new plans begins January 1, 2024.

Since Medicare doesn’t cover all medical expenses, the decision to buy supplemental insurance coverage or to obtain a Medicare Advantage Plan is important for millions of Medicare recipients. Medicare Advantage Plans allow a recipient to get both Medicare Part A and Part B coverage. Medicare Advantage Plans are sometimes called Part C or MA Plans, and are offered by Medicare-approved private companies. Medicare Supplemental Insurance or Medigap helps pay for gaps in coverage not paid for by Medicare. Even though Medicare pays for many procedures and services, some remaining expenses such as copayments, coinsurance, and deductibles are covered by supplemental plans. Some Medigap policies cover services that are not covered at all by Medicare, such as coverage while traveling abroad. So it’s worth shopping and determining what expenses are covered by the various supplemental insurance policies. (Source: medicare.gov)

Consumer Savings Lower – Consumer Behavior

According to the Bureau of Economic Analysis, data has revealed that Americans saved less over the past several years than previously thought. From 2017 through 2022, American consumers were reported to have saved an average of 9.4% of their disposable income. However, revised data figures have identified that the actual savings rate was 8.3%.

Economists view decreased savings as a signal that consumers may be shifting spending patterns. Inflationary pressures over the past two years redirected some consumer funds from non-essential goods and services to essential items like food and gasoline. Spending habits adjusted during the pandemic, as government stimulus funds padded consumer savings for millions. The National Bureau of Economic Research found that roughly 30% of stimulus checks went to consumer savings, while another 30% went to pay off debt. Personal savings reached a historical high in the midst of the pandemic, as retail stores and restaurants were shuttered and stimulus checks went unspent. The savings rate reached 32% of disposable income in April 2020, but fell to 3.9% this past August. (Sources: National Bureau of Economic Research, BEA)