Joel Shulman CIO, CEO, Founder, EntrepreneurShares Market Update (09/22/23)
EntrepreneurShares — First Thematic Investment Strategy in Entrepreneurial, Disruptive, Innovative Stocks
AUGUST LOSSES ACCELERATE IN SEPTEMEBER W/RISING INTEREST RATES o Equities experienced a difficult August — this is now being extended in September (traditionally weakest month of the year) o The fall has coincided with a rise in the long bond yields (rising by 60bp since June 1) and weaker expectations o September is usually most challenging month of the year (falls by 0.7% on average) o Speculative, loss producing, high debt equities are the most vulnerable along with speculative, money-losing equities o September is shaping up as another difficult month (w/few positive catalysts expected in near future) o CPI results are now mixed — eye on labor costs and real estate sales levels and price changes (Mortgage rates 7.23%--22 year high) o Next key indicator will be October 12 (next CPI) — energy is still rising in September … o Next Major Catalyst will be Oct 31/Nov 1 Fed meeting — Fed likely to indicate an end to rate hikes (key signal to # expected rate cuts ’24) YIELD CURVE HAS INCREASED AT LONG END — AND DANGER IS INCREASING o Most of the recent action related to the yield curve (Fitch & PPI) has been to long-end of the curve (coinciding with expectations) o 5yr, 10 yr and 30 yr rates have all increased o Rates have increased approx. 60 basis points from June o 30 yr rates at 4.4% are still well below historical levels (e.g. 8/31 2007 — 4.85%; 8/31/1981 — 14.8%) o Long Term treasuries may be overbought — hedge funds are shorting (offset risk on equities) o Speculative stocks will need to adjust with higher rates (most of impact is over) o Economy is resilient — no major danger yet though signs w/manufacturing and other areas of contraction. RESILIENT ECONOMY HAS, SO FAR, AVOIDED DISASTER, BUT TIME IS RUNNING OUT o Inflation had been under control though recent energy spikes have created an increase in Sept CPI o Energy in September MTD continues to rise o Unemployment rate is low though has been rising recently (from low of 3.4% to 3.8%) o Long term rates, though rising in recent days, are still well below historical averages o Rising 30 year bond rates can cause problems for regional banks that invested long-term o Mortgage rates above 7.2% should slow down real estate market (inventory and sales are dropping) o Mortgage rates (30 yr fixed) are now at highest levels since July 2001 (22 yr ago) o Housing inventories have been declining for many years, but apartment construction is at highest level in 50 years
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