2023 | August 7

The Market

Stocks Fall

Major U.S. stock indexes stumbled to start the week, rallied after Friday’s jobs report, but ended the day with losses. While the Dow posted a weekly decline of around 1 %, the S&P 500 and the NASDAQ posted a weekly loss of over 2%.

The U.S. labor market moderated, adding 187,000 new jobs in July, shy of the 200,000 estimate but in line with June’s revised gain of 185,000. The unemployment rate fell to 3.5%, remaining near its 50-year low.

84% of the companies in the S&P 500 have reported Q2 2023 earnings to date. Among those companies that released second-quarter results as of Friday, 79% exceeded net income expectations, topping the five-year average of 77%, according to FactSet. Overall, earnings are expected to decline about 5.7% relative to a year ago, which will mark the largest earnings decline reported by the index since Q3 2020.      

Ratings agency Fitch unexpectedly downgraded the U.S. credit rating on Tuesday from AAA to AA+. The agency cited the recent debt ceiling standoff and concern over rising federal debt as factors leading to an “erosion of governance.”   

Oil prices rose on Thursday after news that Saudi Arabia’s voluntary production cuts would extend to September and possibly beyond. Oil prices had declined earlier in the week but rebounded on supply concerns, ending the week at over $80 per barrel.

A Consumer Price Index report scheduled to be released on Thursday will show whether the recent moderation in inflation extended into July. The most recent CPI report for June showed that annual inflation decelerated to 3.0% - the lowest level since March 2021 and down sharply from a four-decade high of 9.1% recorded in June 2022.  

Source: John Hancock Investment Management

Welcome Lily Quinn!

AJA Open House

Please mark your calendars for our annual Open House, which will be on Thursday, September 21^st. We look forward to this evening every year and cannot wait to spend another night with our clients, listening to great music and enjoying good food and conversation.

This year’s band is “The Green Hillsbillies”, a local bluegrass band playing everything from mountain fiddle tunes to Grateful Dead to 80’s covers. Click here to see them in action. 

We will again be serving Martin’s BBQ, beverages, and will have a bounce house and games for kids. Please feel free to invite family and friends. RSVP to come soon!

What Are Bonds?

Bonds are loans that investors make to governments, companies and other entities. When an investor buys a bond, they agree to lend their money for a specific period of time. In return, the issuer of the bond agrees to pay interest and return the investors’ principal when the bond matures.

Bonds are a part of many investment portfolios because they:

1)     Offer a source of income, and

2)     Help manage overall portfolio risk.

Generally, bonds are thought to be safer than stocks; however, they are not risk-free. Bonds have interest rate risk, which means the value of a bond changes over time, depending on how attractive its interest rate is to investors. For example:

Bond values fall when rates rise. If interest rates move from 3 percent to 5 percent, and new investors will earn a 5 percent interest, then the value of bonds offering 3 percent are likely to drop. The opposite is also true.

Bond values rise when rates fall. If interest rates move from 5 percent to 3 percent, and new investors will earn a 3 percent rate of interest, the value of older bonds offering a 5 percent return are likely to increase.

The risk and reward profile of a specific bond depends on a variety of factors, including:

The length of time until the bond matures. When a bond “matures,” the issuer is expected to repay the money it borrowed. Maturities may range from one month to 30 years. Bonds with shorter maturities tend to pay less interest because the chance that interest rates will change significantly is lower.

The creditworthiness of the borrower. Creditworthiness reflects whether the borrower is expected to pay interest and return principal in a timely way. Independent rating agencies – Fitch, Standard & Poor’s and Moody’s – review the financial and credit histories of governments and companies that are issuing bonds, and then assign ratings. There are two broad rating categories:

• Investment grade (AAA/highest quality, AA/high quality, A/strong quality and BBB/medium investment grade), and
• Below-investment grade (BB/low investment grade, B/highly speculative, CCC/substantial risk, CC/high probability of default, C/default in process and D in default).

There are many nuances to bond investing. If you have questions, please get in touch.

Phone: (615) 709-8709

Fax: (615) 505-3306

eMoney

TD Ameritrade

Advyzon

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