--- title: Quarterly Letter - October 2023 description: Following two consecutive quarters of solid performance, investors experienced a modest pullback in the most recent three-month period, primarily driven by the dual challenges of inflation and rising interest rates. image: https://blog.connorsinvestor.com/hubfs/stock-results.jpg --- [![Connors-Logo_white](https://blog.connorsinvestor.com/hs-fs/hubfs/Connors-Logo_white.png?width=2002&height=696&name=Connors-Logo_white.png "Connors-Logo_white")](https://connorsinvestor-8494062.hs-sites.com/welcome) [![Contact Us](https://no-cache.hubspot.com/cta/default/8494062/f3416b44-2b5b-4760-a030-d91cce4c08a4.png)](https://cta-redirect.hubspot.com/cta/redirect/8494062/f3416b44-2b5b-4760-a030-d91cce4c08a4) [![Schedule Call](https://no-cache.hubspot.com/cta/default/8494062/67afdc8f-2a86-4070-8644-0e44ee497dd6.png)](https://cta-redirect.hubspot.com/cta/redirect/8494062/67afdc8f-2a86-4070-8644-0e44ee497dd6) ** ** [![Connors-Logo_transparent](https://blog.connorsinvestor.com/hs-fs/hubfs/Connors-Logo_transparent.png?width=2002&height=696&name=Connors-Logo_transparent.png "Connors-Logo_transparent")](https://connorsinvestor-8494062.hs-sites.com/welcome) [![Contact Us](https://no-cache.hubspot.com/cta/default/8494062/96ea8069-0ffa-4f7b-8b37-916e7946a4a8.png)](https://cta-redirect.hubspot.com/cta/redirect/8494062/96ea8069-0ffa-4f7b-8b37-916e7946a4a8) [![Schedule Call](https://no-cache.hubspot.com/cta/default/8494062/67afdc8f-2a86-4070-8644-0e44ee497dd6.png)](https://cta-redirect.hubspot.com/cta/redirect/8494062/67afdc8f-2a86-4070-8644-0e44ee497dd6) ** ** **Menu** ** ** [![Contact Us](https://no-cache.hubspot.com/cta/default/8494062/9362a15d-6c0f-4660-a20f-408ae2bb70b7.png)](https://cta-redirect.hubspot.com/cta/redirect/8494062/9362a15d-6c0f-4660-a20f-408ae2bb70b7) [![Schedule Call](https://no-cache.hubspot.com/cta/default/8494062/469d95aa-6a7b-4e31-b171-bfa9f31f41b0.png)](https://cta-redirect.hubspot.com/cta/redirect/8494062/469d95aa-6a7b-4e31-b171-bfa9f31f41b0) ![shutterstock_1597926586](https://blog.connorsinvestor.com/hs-fs/hubfs/shutterstock_1597926586.jpg?width=6000&name=shutterstock_1597926586.jpg "shutterstock_1597926586") # Commentary   # Quarterly Letter - October 2023 by [Peter J. Connors, CFA](https://blog.connorsinvestor.com/commentary/author/peter-j.-connors-cfa), on October 01, 2023 Following two consecutive quarters of solid performance, investors experienced a modest pullback in the most recent three-month period, primarily driven by the dual challenges of inflation and rising interest rates. The S&P 500® Index registered a 3.72 % decline while maintaining a year-to-date increase of 13.05%. The Russell 2000® Index saw a 5.14% drop, with a 2.51% year-to-date increase, and the Bloomberg Barclays U.S. Aggregate Bond Index decreased by 3.23%, netting to a -1.21% year-to-date. Notably, September, historically a weaker month for equity market performance, accounted for most of the quarterly decline. Sector performance was varied, with the Energy sector displaying notable strength with an impressive 11.3% increase. Communication Services also showed promise, with a 2.8% rise attributed to Alphabet and Meta. On the other hand, interest rate-sensitive areas like Utilities (-10.1%) and Real Estate (-9.65%) faced headwinds. Mega-cap stocks have emerged as the perceived new safety stocks, with the “Magnificent 7” (Amazon, Google, Meta, Microsoft, Apple, Telsa, and Nvidia) leading the way. An important open question remains, the staying power of these names given their large growth expectations which is reflected in their stock price and may be justified. History shows, however, that in periods of overconcentrated leadership in the market, such as the Nifty Fifty and the Dot.com era, markets may adjust and sometimes suddenly in these names or ideally market participation broadens. Indicative of this current concentration, the S&P 500® Index performance year-to-date was 13.1%, while the equal weighted counterpart returned 1.8%.   The recent broader market pullback, primarily a technical consolidation to support levels, is attributed to the sudden surge in interest rates. The 10-year U.S. Treasury note yield reached as high as 4.68% before settling at 4.57%, marking a 50-basis point increase in a month. The Federal Reserve's commitment to higher rates in response to a slowly declining inflation landscape remains a central driver. The economy's robustness, supported by extensive fiscal spending, has been notable.  As we move forward, it's imperative to consider the possibility of persistently high inflation. The ongoing debate regarding whether rates will stay elevated or revert to historical norms hinges on supply dynamics, geopolitical shifts, and global economic conditions. Labor market data and job-related metrics will be critical factors also.  While investors may continue to focus on the positives of inflation trending lower, a peaking Fed Funds Rate, and continued economic strength, it's important to acknowledge that volatility and uncertainty may increase as headlines dominate the unfolding conflict in the Middle East. Past market performance during world conflicts can serve as a guide for the future. Our team analyzed several significant global events, from the bombing of Pearl Harbor on December 7, 1941, to the more recent Russian invasion of Ukraine on February 24, 2022. ![](https://blog.connorsinvestor.com/hs-fs/hubfs/image-png-Jul-17-2024-08-39-23-7634-PM.png?width=1490&height=890&name=image-png-Jul-17-2024-08-39-23-7634-PM.png) It is evident from history that global turmoil can disrupt markets, yet our domestic markets have shown remarkable resilience. While volatility can be expected, viewed on a longer-term scale, the ability of the markets to adapt and thrive is apparent. Importantly, the context of the economic background in which significant events occur is keenly important. For example, the Arab oil embargo dramatically affected markets as it happened during high inflation and further exacerbated that trend. Our commitment remains to invest in high-quality companies that represent long-term opportunities.  As we implement our portfolio construction, we will carefully factor in your unique risk tolerance, time horizon, income requirements, and tax implications.  While seeking to achieve your goals, portfolio design and asset allocation are as important as the rigorous work our team completes around stock selection; please be sure to communicate any changes to your situation that we should be aware of*.* As always, we appreciate your trust and confidence as we navigate these complex times.  Please do not hesitate to reach out if you have any questions or need further discussion.  Sincerely, ![43DEAADE-78CC-4480-8E12-F88F72FC85B6_4_5005_c](https://blog.connorsinvestor.com/hs-fs/hubfs/43DEAADE-78CC-4480-8E12-F88F72FC85B6_4_5005_c.jpeg?width=160&name=43DEAADE-78CC-4480-8E12-F88F72FC85B6_4_5005_c.jpeg) Peter J. Connors, CFA President   Important Disclosure Information *Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Connors Investor Services, Inc. [“Connors]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. 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