Rising interest rates.
The current position of the Federal Reserve on interest rates? Higher-for-longer, which has led to a significant adjustment in investor and market expectations regarding when, and by how much, the Fed would be cutting rates. The Fed’s commentary adjustment to a more restrictive policy has translated into market expectations of additional headwinds for companies in 2024.
The sentiment on corporate earnings has been improving over the past few months, a good sign for year end. What corporations end up earning is the main driver behind their value. If earnings turn the corner and Q3 is as good, or better, than expected, the markets might regain some of their lost momentum into the close of 2023.
The looming government shutdown is all over the news. Its impact on the stock markets is historically muted. A related casualty that might make this time around different is that any shutdown is likely to result in a delayed release of economic data. This same data is what the Federal Reserve relies upon to inform their interest rate decisions. Not a good time to be flying blind when it comes to interest rate policy. Let’s hope this shutdown is shorter than the norm.