As a child, fall was always a favorite time of year. When school started it always gave me an appreciation of the renewal and changes a new school year brought with it. Luckily, I maintain that appreciation of change because the way things are progressing, I think I may be using it a lot. Since 1945, the world has operated in basically two distinct periods, that were orderly. First was the Cold War with the competition between the United States and the Soviet Union, which effectively split most of the world in two and saw few major changes as both sides tried to outmaneuver the other without things spilling over into open war. The Cold War ended in 1991 with the collapse of the Soviet Union. The post-Cold War era was marked by globalization, a ‘peace dividend’, and a focus on business rather than warfare, with a few notable exceptions. Markets and countries opened in a way not seen before, trade flourished, and urban centers exploded as people moved out of rural areas to cities.

We are apparently now done with that era and entering a new one. One of the geopolitical authors I follow, Peter Zeihan, summed it up nicely in a recent video with the comment “This is what it looks like when history starts moving again.” So far, this era has brought with it smaller generations, deglobalization with countries around the world trying to bring production closer to home, and a heightened level of conflict both between countries, but also within. Despite all this, our goal remains the same, to help our clients reach their goals. To do so, we will look at how the U.S. economy and capital markets have performed in the last quarter and what we see going forward within the backdrop described above.

The 3rd quarter of 2023 saw most stock indexes give up some of their gains from earlier in the year as bond yields continued to move up. Most of the focus is on the Federal Reserve (the Fed) and its continued response to inflation. There is a back-and-forth narrative of “will they or won’t they” raise rates again. We suspect there may be one or two more movements up in interest rates before the Fed declares victory over inflation. One of the most concerning economic aspects the Fed is seeing is the continued strong employment markets. Previous slowdowns have been marked by a spike in unemployment. So far, we have not seen any strong signs of that. We think that has to do with the continued reindustrialization of America along with the continued aging of the Baby Boomer generation. By some counts, there are ten thousand people turning 65 each day.

As we look forward to the end of the year and the beginning of next year, we suspect we will see continued volatility given the changes we are currently experiencing. Although, we expect to see some settling down once we get into the winter months. Next year is an election year, which typically bodes well for the equity markets as politicians tend to want to get reelected and a good economy lends itself well to reelection. While Washington D.C. always seems to be having issues these days, we still hope that cooler heads will eventually prevail given the stakes.

If you have any concerns or have had any changes in your circumstances, please reach out to our office if you would like to discuss them, or so that we may incorporate them into your financial plan.  We very much appreciate the faith and trust our clients have put in us and look forward to working with you in the future.

Kevin P. Sullivan, CFA, CFP®, AIF

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Colorado Springs, CO 80906 

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