Market Commentary: Once and Now Upon A Time

by Gayl Mileszko

Once and Now Upon A Time

For the first time in US history, our House Speaker has been removed from office. A group of eight dissident Republicans voted with all 212 Democrats to vacate the chair on Tuesday afternoon. Kevin McCarthy (R-CA), second in line to the presidency, elected to the post in January after an unprecedented 15 roll call votes, was suddenly edged out of office despite having the support of a majority in his majority party. All House business has ceased, as candidates jockey for votes to start being counted next week. This brings a new type of uncertainty to Wall Street as well as Main Street that may continue for some time.  


The US Federal Emergency Management Agency and Federal Communication Commission held its first nationwide test on Wednesday to ensure that the Emergency Alert System and Wireless Emergency Alerts are operational in the event of a national crisis. Given a national debt of $33 trillion, a budget deficit of $2 trillion, half the Congress leaderless, the former president facing four state and federal indictments, the incumbent president the subject of an impeachment inquiry, the government funded for only another six weeks, and 4.2 million illegal border crossings in the last two fiscal years, many would say that we already are in a national crisis.


The largest health care worker strike in U.S. history involving 8 unions and 40% of Kaiser Permanente’s staff is now underway in 6 states. In September, autoworkers at Big Three assembly plants in Michigan, Missouri and Ohio simultaneously stopped work, marking the first time in UAW history. And now at 75 days and counting, longer than in 1960 when Ronald Reagan was the leader of the Screen Actors Guild, Hollywood actors and artists have been on strike.  President Biden was the first president to join a picket line in Wayne County, Michigan. He is also the oldest person elected to the highest office and has added to the list of other presidential firsts: the first to leave U.S. soil, Theodore Roosevelt; the first to be heard on the radio, Harding; the first televised presidential address, Truman; the first to visit China, Nixon; the first to post on Twitter, Obama; the first to be impeached twice by the House, Trump. 

Noteworthy in 2023

There have been many other firsts so far in 2023, both good and bad, here and abroad.  Jimmy Carter became the first American president to celebrate his 99th birthday.  Federal student loan payments are due for the first time since 2020. On October 3, the average rate on the 30-year fixed rate mortgage rose to 7.72%, the highest since late 2000. The national median home price in August was $407,100, and the September report from real estate data provider ATTOM shows that the median home prices in 99% of 575 U.S. counties are beyond the reach of the average income earner who makes $71,214 a year. For the first time in Vatican history, women will be allowed to vote at the next meeting of the Synod of Bishops. Giant pandas on loan to the U.S. from China, who have brought such delight to millions of American zoogoers since 1972, have all been recalled by China in yet another reflection of deteriorating US-Sino relations; the next to leave are the three at the Smithsonian who will return in December followed by the last four in Atlanta next year.

Investor Uncertainty

This time, after more than a dozen years of near zero interest rates, investors are finally absorbing the fact of higher rates for longer, the painful result of the Federal Reserve’s monetary policy turnabout in March 2022 in response to 40-year high levels of inflation. Fed officials have been trying to shock markets with a long series of hikes for the past 19 months, but stock and bond markets as well as consumers in general have been slow to accept the words and the impact. Finally, just at the start of this final quarter of the year, we are seeing some violent market moves as reality sinks in.

Market Volatility

Stock market volatility, as measured by the Chicago Board Options VIX Index, rose 29% in the third quarter and is up another 9% in these first three trading days of October. The spot price has pushed above that of its three-month futures, a rare inversion The S&P 500 and the Nasdaq are still up on the year, but both lost about 4.6% in the third quarter. The Dow and the Russell 2000 have reversed all the year’s gains are now posting negative returns. Even the haven commodity of gold, now at $1,824 an ounce, is down 5% in 2023.

Bond Yields

In the financial markets, for the first time since June of 2007, the 30-year Treasury yield just hit 5.00% and the 2-year is at 5.06%. The 10-year Treasury yield climbed above 4.75% for the first time since August 2007. The peak of the Treasury curve – the maturity with the highest yield, is the 6-month bill which, at 5.56%, has not been at this level since late December of 2000. Volatility, as measure by the MOVE Index, increased 28% in the third quarter and has risen another 25% since Monday.

Muni Yields

In the tax-exempt market, the 10-year AAA benchmark yield rose above 3.50%, a recent record. But, for the first time ever, the short end of the municipal bond yield curve has remained inverted for more than nine months. At this writing, 1-year yield at 3.74% is higher than that of the next 12 maturities. Year-to-date returns for investment grade bond indices turned negative in September. It would be an historic first if the year ended on a negative note for a second consecutive year, but all kinds of records are being set this decade.


We will give a recap of these last three quarters in our next market update.  But for now, we prefer to focus on the quarter ahead.  Amid all the unprecedented political change and economic uncertainty facing us, we find tremendous yield and income opportunity in the day-today bonds market just now. As many investors become unsettled by market volatility, poor fund performance, falling prices, and quirky evaluations for those bonds that infrequently trade but nevertheless continue to demonstrate solid performance and good debt service coverage, our traders are seeing tremendous value in tax-exempt, taxable muni, corporate, government and government agency credits.  We find rarely seen names surface in the elevated levels of offerings and bids-wanted in the daily market flow. Reach out to your HJ Sims Representative today to discuss how your portfolio may benefit by moving cash or swapping other positions into higher yielding tax-exempt and taxable bonds before year-end.