October 2023 Monthly Commentary

Greetings Team!

We hope this newsletter finds you well, and we thank you for choosing to stay informed about the ever-changing world of finance.

First and foremost, we want to acknowledge the tragic events currently unfolding in the Middle East and send our deepest sympathies to all those who have been impacted by this heartbreaking situation. Secondly, we would like to express our gratitude to each of you who attended our client event in Beverly Hills. It is always a pleasure to have the opportunity to spend time with people in person. This year’s gathering was undoubtedly memorable, featuring the introduction of SBOT, an awe-inspiring holographic representation featuring none other than Steven Schmitt, along with great food, tasty cocktails, and an abundance of laughter. If you were unable to join us in person, no need to despair, as we will be hosting a similar event on the east coast this spring.

As always, we here at the Schmitt Group are closely monitoring the latest market trends and economic indicators, and how they may impact your holdings. Although economic headwinds continue to persist, it seems that this economic cycle is nearing the end, which is what we have been waiting for. The biggest tell-tale sign is that the Federal Reserve, through aggressive rate hiking and quantitative tightening, is ‘finally’ getting inflation under control. The fed has raised interest rates 11 times since March 2022 to its highest level in 16 years and reduced its balance sheet to $7.9 trillion, down from a peak of $9 Trillion. Note: when the fed wants to slow-down the economy to tamper inflation, it increases interest rates and reduces its securities holdings, thereby removing money from the economy. The Federal Open Market Committee (FOMC) will hold its next meeting today, November 1st. Investors will be closely watching the meeting for any signals about future interest rate hikes and changes to its securities holdings. According to Business Insider, traders are seeing 97% odds of no interest rate adjustments during today’s meeting. In December, traders are seeing only 29% odds for a 25-basis point hike. Even though rates are at historically restrictive levels, Fed officials have fully embraced a ‘higher for longer’ mantra and interest rate cuts are not expected until the second or third quarter of 2024, solidifying our view that we are nearing but not quite at the end of this economic cycle.

From a Schmitt Group perspective, our strategy has remained relatively unchanged. In the short-term, we will continue to de-risk across vulnerable sectors of the market, including Financials, Real-Estate, and Transports. As the economy starts to recover, we will be prepared to capitalize on attractive small and mid-cap growth companies, large-cap value companies and dislocated segments of the fixed income markets.

Other indicators we have been closely monitoring include, but are not limited to:

Recent Economic Indicators

• Real gross domestic product (GDP) increased at an annual rate of 4.9 percent in the third quarter of 2023 relative to 2.1 percent in the second quarter. The increase in the third quarter primarily reflected increases in consumer spending.

• According to the Commerce Department Report, core personal consumption expenditures (PCE), which the Federal Reserve uses as a key measure of inflation, increased .3% for the month. Personal spending rose by .7%, which was better than the .5% forecast.

• The conference board, a business research group, said Tuesday that its consumer confidence index fell to 102.6 in October from 104.3 in September. The index measures both American’s assessment of current economic conditions and their outlook for the next six months.

• Last week, 30-year fixed mortgage rates reached 8% for the first time since 2000. Despite these increases, US home prices have shown little sign of cracking. Why? Primarily because people who locked in low mortgage rates during the pandemic are reluctant to sell, thereby creating a shortage of supply.

Upcoming Economic Announcements

• The Federal Open Market Committee (FOMC) will hold its next meeting today, November 1st

• The Bureau of Labor Statistics will release its monthly employment report for October on Friday, November 3rd at 8:30 a.m. ET.

Thank you for the opportunity to serve your financial goals. If you have any questions, please don’t hesitate to reach out. We would be glad to hear from you. Additionally, if you know anyone who would be interested in receiving this newsletter, please provide us their name and email. We would be happy to add them.

Onward and upward!

Daniel J. Mar, MBA^®, CPM^®, CRPS^®, ADPA^®
Managing Director
The Schmitt Group of Raymond James

Any opinions are those of Steven Schmitt and Daniel Mar and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information contained in this commentary does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. This material is being provided for informational purposes only and is not a complete description, nor is it a recommendation. Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.