Key changes from October report:
- Downgrading real estate view from positive to neutral.
After ending September with a 24% loss for the year, stocks surged in October as the S&P 500 returned 8.1%. That strong gain trailed the Dow Jones Industrial Average, which surged 14% for the month, its best month since 1976.
Speculation that the Federal Reserve (Fed) would soon signal a slower pace of rate hikes amid some additional evidence of cooling inflation pressures, seemed to be the primary catalyst for the rally. Extremely pessimistic sentiment, historical seasonal tailwinds, positioning ahead of the midterm elections, and well-received earnings results also played a role.
Core bonds, as measured by the Bloomberg Aggregate Bond index, lost 1.3% during the month as Treasury yields rose modestly in October. The market’s expectation that the Fed may need to take rates higher and stay there longer than previously anticipated helped pushed Treasury yields higher
The Strategic and Tactical Asset Allocation Committee’s (STAAC) S&P 500 year-end fair value target of 4,000-4,100 is based on a price-to-earnings ratio of 17.5 times the STAAC’s 2023 S&P 500 earnings per share forecast of $230.
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