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Capital Markets Commentary

Stocks again moved lower in the third quarter as the Federal Reserve continued to boost interest rates to combat stubbornly high inflation. The Consumer Price Index (CPI) topped 9% in June for the first time since 1981 and remained above 8% in both July and August. In response, the Federal Reserve raised the Federal Funds rate in September for the fifth time this year and signaled further rate hikes are likely. Geopolitical tensions also weighed on global markets as European economies struggled with the lack of energy flowing from Russia. The S&P 500 lost 4.9% during the quarter, pushing its year to date loss to 23.9%.

Energy remained the only sector in the market with a positive return YTD and was up slightly in the third quarter. The consumer discretionary sector was the only other sector with a positive third quarter return, but is still down sharply for the year. The Technology and Communications sectors traded lower in the third quarter and remain the worst performing sectors in the market year to date.

The year long move higher in interest rates intensified during the quarter and continued to push bond prices sharply lower. The 2-year Treasury yield rose from 2.93% to 4.20% during the quarter, moving above the four percent level for the first time since 2007. The 10-year Treasury yield rose from 2.98% to 3.80% during the quarter. The Bloomberg Aggregate Bond Index lost 4.8% for the quarter and has lost 14.6% year to date.