Equity markets displayed a willingness to overlook geopolitical tensions this week, with investors focusing on monetary policy back home. A central theme was the debate over the recent surge in Treasury yields and how the subsequent tightening of financial conditions will impact the Fed's policy stance.

Stocks and bonds were both impacted by a chain of events during the third quarter. It started with rising oil prices, which caused inflation to re-accelerate in August. Here we recap the third quarter, discuss the rise in oil prices and interest rates, and look ahead to the fourth quarter of 2023.

Investor sentiment has remained upbeat throughout 2023. Financial markets have rebounded from their 2022 sell-off, with the S&P 500 gaining more than 15% and credit spreads tightening. The Fed's tightening cycle is nearing an end, and its impact has been limited thus far compared to prior tightening cycles.

The August market action is a continuation of the primary trend we have seen this year. The market remains fixated on the Fed’s next move, including how high the Fed will raise interest rates and whether it will cut interest rates in 2024.

In August, the Consumer Price Index (CPI) rose 0.6%, following a 0.2% rise in July (Figure 1 ). It was the biggest monthly increase in 14 months, with the recent surge in gasoline prices accounting for more than half of the rise. Excluding food and energy, the index rose 0.3%, compared to 0.2% in July.

The August market action is a continuation of the primary trend we have seen this year. The market remains fixated on the Fed’s next move, including how high the Fed will raise interest rates and whether it will cut interest rates in 2024.

The U.S. consumer plays an important role in the economy, accounting for almost two-thirds of U.S. GDP. However, consumer spending has steadily trended lower since July 2022, with the Johnson Redbook Index experiencing a relatively rare year-over-year decline in July 2023.

The S&P 500 extended its winning streak to five months in July, bringing its year-to-date total return to 20.5%. The S&P 500 has now recovered most of its losses from 2022 and is currently trading less than 5% below its all-time closing high set in January 2022.

Investors can earn income in one of two primary ways – dividends paid on stocks or interest paid on bonds. As of July 11th, only 51 companies in the S&P 500 paid a dividend yield above the yield on a 5-year Treasury bond.

A year can make a big difference. One year ago, the market was trying to catch its breath after a chaotic start to 2022. We review the second quarter, recap the strong start to 2023, and discuss our outlook for the second half of the year.

As you change jobs or prepare to retire, you must determine what to do with the funds in your employer-sponsored retirement plan account. Since this money plays a significant role in ensuring that your retirement years are comfortable, it is important to understand your options.

When you retire, taking care of your 401(k) may be the most critical issue. The decisions you make regarding the earnings of your 401(k) plan can significantly impact your financial security for the rest of your life.