May 22, 2023 •Nathan Willis
Key Events: Deal or no deal
The news cycle was dominated by debt ceiling negotiations, which appear on track to produce a bi-partisan agreement. Some other notable items this week:
- The Dallas Fed President said that continued inflationary pressures may preclude the expected pause in rate hikes.
- With 95% of companies reporting, earnings are down for the third quarter in a row but are down less than originally expected.
Market Review: Stocks gain amidst uncertainty
Stock returns were not held back by the lack of debt ceiling progress; The S&P 500 rose 1.7% with growth stocks leading the way. International stocks rose modestly.
Bonds lost money as yields rose towards their highest levels since the March onset of the banking crisis in reaction to hawkish Fed comments.
Outlook: Uncertainty – volatility and opportunity
Although history does not repeat itself, it is wise to be attentive to it. The below chart notes how assets fared during the tense 2011 debt ceiling crisis. Risk assets have not reacted negatively during 2023, and while strong stock returns have been driven by the largest names, smaller stocks have remained mostly in the green.
OneAscent portfolios continue to be diversified, including allocations that may hold their value if the crisis causes risky assets to sell off. This will allow us to be prepared to take advantage of volatility rather than be a victim of it.
Returns during 2011 debt ceiling crisis[1]
1 Source: Marketwatch What happened to investments during the 2011 debt-ceiling crisis? - MarketWatch
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