September 29, 2023
😎 It's Friday. We made it.
- Today's newsletter is 739 words, 3 minutes.
1 big thing: Bear market is still a bear
After clawing to within 5% of a new record high, much of the S&P 500's 2023 gains have melted away over the last few months, Matt writes.
Why it matters: Touching a new high is the traditional confirmation that stocks are officially in a new bull market.
Context: The market staged a remarkable rally after it bottomed almost a year ago, on Oct. 12.
- Stocks started to rise as inflation reports showed a welcome slowdown in price increases.
- Falling inflation led to a tumble in long-term interest rates as investors bet the Fed might ease its tough monetary policy. (Lower long-term interest rates tend to boost the stock market.)
By the numbers: The S&P 500 soared nearly 30% between October and July.
- The tech-heavy Nasdaq jumped nearly 40%.
- That led some to declare that happy days were here again and that a new bull market had begun. (Your humble Axios scribe was reluctant to agree.)
Yes, but: That was then. Since the end of June, inflation — like Monty Python's proverbial plague victim — has shown it isn't dead yet.
- Oil prices have jumped — thanks to Saudi Arabia and Russia cutting production.
- Home prices have resumed their upward climb.
- And the economy has stayed pretty strong causing many to rethink their views that a near-term recession would eventually lead to rate cuts.
The impact: Long-term interest rates are now the highest in 16 years — and stocks don't like it.
- With one trading day remaining, the S&P has shed more than 4.6% this month, in its second straight monthly decline. It was its worst month of the year.
- The benchmark index, which in late July was up nearly 20% for the year, is now looking at gains of just 12%.
The bottom line: The "new bull market" may just be a bear market rally.
2. Catch up quick
3. Crude oil and cash conquered all in Q3
Crude oil and super-safe, short-term cashlike investments were your best bets in Q3 — while long-term bonds got beaten up pretty good, Matt writes.
The big picture: The story behind the numbers is the as-yet-unfinished battle between the Federal Reserve and inflation.
Context: A sharp uptick in crude oil prices over the last few months — driven by production cutbacks by OPEC+ pals Saudi Arabia and Russia — has reinvigorated inflation pressures.
- It's also rewarded investors who bet on rising oil prices.
- The S&P 500 energy sector was up about 14% in Q3, the only industry component of the benchmark index that saw a gain.
- And the U.K.'s commodity-heavy FTSE-100 also fared decently.
Where it stands: Outside of energy, the pain in stocks was pretty broad-based — including a sharp downturn for both the tech-heavy Nasdaq and Russell 2000 index of small-cap stocks that tend to be sensitive to short-term expectations for the U.S. economy.
Yes, but: The weakness in Q3 doesn't spell disaster for full-year returns, given how well the markets performed earlier this year.
- The Nasdaq is still up 26% this year.
4. IPOs inch back
The IPO machine is slowly creaking back to life — deals picked up over the last two quarters after more than a year of near-zero activity.
Catch up quick: A handful of sizable, closely watched offerings priced in September — chip maker Arm Holdings, grocery delivery service Instacart, and e-commerce marketing automation provider Klaviyo. But they haven't traded all that well.
- What's next: Not much.
💭 Our thought bubble, via Axios' Dan Primack: Late Q3 momentum doesn't appear to be carrying into Q4, as Birkenstock is the only major company currently on the IPO calendar.
- The big wild card: SEC chair Gary Gensler warned this week that a government shutdown would bring the approval process for new registrations to a halt.
5. 🌊 The shutdown wave cometh
Axios Markets will be open for business on Monday — but there are a lot of question marks in a lot of other places.
What we're watching: If lawmakers don't figure something out by tomorrow, the federal government will shut down.
- Later today, UAW is set to announce whether the union will expand its strike against the automakers.
- On Sunday, the U.S. hits the child care cliff, which threatens to shutter as many as 70,000 day care providers.
- The one thing that's "opening" next week? Student loan payments. After more than three years, borrowers have to start paying money again.
Was this email forwarded to you? Subscribe here.
Today's Axios Markets was edited by Kate Marino and copy edited by Mickey Meece.