This Week in Review:

October Begins with
a Bounce Back

Welcome to The Week in Review. We have created this new email update to share our take on what moved the markets this week, the economic indicators we’re watching and how what we’re seeing impacts our strategies. We hope you find it useful. If you have any comments or questions, please send them our way at

Jeremy Witbeck |


After a September shellacking, stocks roared out of the gates earlier this week, with major indexes notching their largest two-day gains in over two years before pulling back mid-week.

Of course, that’s just a few days. We’re not sounding the all-clear or saying we’ve seen a bottom. Nobody knows in real time when bear markets end and bull markets begin. But the markets’ flip-flop (bonds also rallied) certainly puts the lie to those who think they can predict ups and downs.

Our response to the markets’ machinations is to remain vigilant, participate in bear-market rallies as they occur and stay focused on helping you achieve your long-term goals. Here’s what else we’re focused on and why it matters:
  • Job openings fell by the most in over two years in August, contributing to this week’s stock rally. Counterintuitive? A red-hot labor market pushes wages up and leads to higher prices for goods and services. If job growth slows, monetary policymakers at the Federal Reserve can consider easing up on their aggressive interest-rate-hiking agenda. Still, layoffs remain low—with 1.7 open jobs in August for every unemployed American, down from 2.0 in July but above the historical average.

  • OPEC+, the international energy cartel led by Saudi Arabia and Russia, announced Wednesday it would reduce oil production by two million barrels a day (roughly 2% of global oil production) in a bid to push up prices. After falling 32% over the last four months, oil prices began to tick back up in late September, with crude hitting its highest mark since Sept. 14 on the news. The question is how much the move will impact inflation, which had appeared to be slowing.

  • Left for dead in the age of e-commerce, retail real estate—yes, brick-and-mortar stores—appears in better shape today than it has in at least 15 years. Retail vacancies dropped to just over 6% in the second quarter, and more stores opened than closed in 2021, the first time that’s happened since 1995. In fact, in-person retail sales are increasing faster than internet sales this year. Is this a blip as consumers rediscover shopping malls after being cooped up during COVID, or merely a reflection of a slowdown in construction where fewer stores see greater traffic? Either way, it signals the enduring power of the American consumer: Shopping appears alive and well heading into the all-important holiday season.
  • Chart of the Week: Interest Rates Are Dictating Stock Leadership

    For almost the entire decade of the 2010s, easy money policies and a surge in government spending propelled growth stocks above their value counterparts. Groups of stocks like FAANG and the Fab 5 drove an enormous portion of the S&P 500’s returns, especially in the latter half of the decade.

    That’s starting to change. The observation window is short, but a trend is emerging in Wall Street’s never-ending battle between growth and value stocks. Our research suggests that a shift in monetary policy could mean that there is a new sheriff in town.

    First, it helps to understand how Wall Street analysts forecast returns and assign price targets for stocks. Many firms use a discount rate to value a company’s future projected earnings. This price tag analysts put on tomorrow’s earnings plays a big role in determining the overall target for a stock’s price. The discount rate is often pegged to interest rate moves or inflation—both of which are jumping into multi-decade highs.

    Those big changes in discount rates are leading to big shifts in analysts’ price targets. We think they can help explain the shifting fortunes of growth and value stocks this year. Throughout 2022, we’ve seen significant, periodic performance differences between growth and value stocks. And those spurts of over- and underperformance appear to be tied to the dramatic moves in the 10-year benchmark bond rate. Why do we believe this? Let’s look at the chart!

    Over the first half of the year, we saw one of the quickest climbs for interest rates in history. Ten-year rates rocketed from multi-decade lows to nearly 3.5% in less than a year. The result? Value stocks outperformed growth by a massive 16.2% in six months! A quick reversal in interest rates led to another swing in performance. Growth now outperformed value by 7.9% in less than two months, meaning value gave away nearly half of its outperformance for the year. As you can see, when rates began climbing higher in August, Value retook its place on the outperformance throne.

    Note: Chart shows daily yield for the 10-year Treasury bond from Dec. 2021 through Sept. 2022, along with periods of growth stock and value stock outperformance. Growth stocks are represented by the Russell 1000 Growth index and value stocks by the Russell 1000 Value index. Sources: Factset, Polaris.

    The unprecedented volatility in interest rates appears to be dictating stock leadership. It may be too early to claim correlation is causation here, but something noteworthy is afoot! Our investment team will continue to monitor this development to further understand how inflation and, more importantly, interest rates are impacting the marketplace.

    Best and Worst Market Days Stick Together

    September lived up to its reputation as a lousy month for stocks as the S&P 500 index posted its third-worst September in six-and-a-half decades. Then, as mentioned above, October got off to a cracking start with the S&P index gaining more than 2% on each of the month’s first two days.

    What this volatility tells us is that we are firmly in a bear market. During bear markets, stocks tend to move much more—both up and down—on any given day than in bull markets. In fact, the worst and best days in the stock market tend to cluster during bear markets.

    Note: Chart shows daily yield for the 10-year Treasury bond from Dec. 2021 through Sept. 2022, along with periods of growth stock and value stock outperformance. Growth stocks are represented by the Russell 1000 Growth index and value stocks by the Russell 1000 Value index. Sources: Factset, Polaris.

    As you can see, the 20 best days (triangles) and the 20 worst days (diamonds) in the stock market since 1990 occurred during the run-up and then bursting of the tech bubble (1997–2002), the Global Financial Crisis (2008–2009) and the COVID panic (March 2020). Yes, there were also a few outliers, but you get the picture.

    There’s some logic to all of this: When stocks are down a lot, trader and investor emotions are on edge. When emotions are running high, the market is poised for big swings day-to-day.

    Are Digital Assets Done For?

    Bitcoin’s price is down almost 60% year-to-date and it’s a similarly sad story for other digital currencies. On top of poor performance, the year has been riddled with negative news about cryptocurrency security and potential regulatory oversight. Just this week, Treasury Secretary Janet Yellen released a report asking Congress to legislate tighter regulations over digital asset trading.

    Additionally, there have been large-scale layoffs at crypto firms and we’ve seen some serious flaws exposed in parts of the system as prices sank—the bankruptcy of crypto lender Celsius in July being the most notable sign of distress.

    That said, all is not lost in crypto land: Last month, NASDAQ announced plans to act as a custodian for bitcoin and ethereum on behalf of institutional investors, and other larger financial institutions are lining up to offer similar services.

    The fact that institutional adoption hasn’t evaporated is one key difference from prior crypto crashes. As for price performance, there are still some positive signals. We looked at bitcoin’s relative strength index, which tries to measure the rate at which the asset is selling, with below 30 being oversold and over 70 being overbought. What we found was that if you bought bitcoin every time its relative performance sank below 30 over the past four years, your average one-year return was 38%.

    Now, that comes with some massive caveats, most notably that the drawdowns over the full period from 2011 to today have gone as low as 93% and buying on the way up would require more than a little market-timing magic.

    In summary, it’s been a rocky road for crypto bulls this year, but that’s nothing new. We can’t say for sure that we’ve seen the bottom in prices—regulation, interest rates and distressed crypto-related firms are all huge headwinds. But crypto optimists are holding out hope for a bright future (and Fidelity clearly sees a market; it launched an ethereum index fund for accredited investors at the end of September). History shows us that it may pay to hold on to your coins as long as you can afford some big drawdowns along the way.

    The usual digital-asset disclaimer applies: When it comes to crypto, don’t invest more than you can afford to lose.

    Looking Ahead

    Next week, we’ll get a look at the minutes from last month’s Federal Reserve meeting, as well as helpful reads on small businesses, inflation, retail sales and consumer sentiment.

    If you’d like to learn more about our tactical or fundamental strategies, please contact our team at 844-587-7393 or

    Please note: This update was prepared on Friday, October 7, 2022 prior to the market’s close.

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