From Kiplinger · · 2m
Headline Indexes Steady, Rising Yields Signal Market Risks
Rising U.S. Treasury yields and market concentration threaten Q4 investment stability.
In brief
Rising U.S. Treasury yields and market concentration threaten Q4 investment stability. Headline equity indexes gained 2% in Q3 despite median stocks falling 15% below 52-week highs as rising yields and Fed tightening signal market risks ahead of Q4. Originally reported by Kiplinger.
Q3 equity indexes gain 2%
Headline equity indexes spent the third quarter displaying extreme market concentration.
Median stock falls 15% below 52-week high
The median stock ended the quarter more than 15% below its 52-week high.
Treasury yields surge to multiyear highs
Despite surging long-term Treasury yields, sticky energy costs and the Fed's renewed tightening, headline equity indexes continue to defy the classic mantra to 'not fight the Fed'.
AI optimism counters market risks
AI optimism continues to act as a strong counterweight.
S&P 500 shows internal decay
The S&P 500 gained roughly 2% in Q3, a headline number that suggests smooth sailing, but the surface stability masks divergence beneath index weights.
263 more decliners than advancers
The S&P 500 had 263 more decliners than advancers in Q3.
50% of stocks below 200-day moving average
Even more stark, over 50% of S&P 500 stocks are trading below their 200-day moving average.
Equal-weighted index lags market-cap-weighted
The S&P 500 Equal Weight Index is now underperforming the traditional market-cap-weighted index by its largest margin since 2002.
Small-cap stocks suffer drawdowns
Sectors most vulnerable to elevated borrowing costs, particularly small-cap stocks (Russell 2000) and residential housing developers, suffered sharp drawdowns during the quarter.
10-year Treasury crosses 5.3%
The 10-year Treasury crossed 5.3%, while the 30-year finished above 5.6%.
Treasury prices down 50% from 2020 highs
Long-term U.S. Treasuries remain in one of their most severe bear markets in modern history, with 30-year Treasury bond prices down over 50% from their 2020 highs.
Fed raises rates by 25 basis points
The Fed raised rates by 25 basis points in September to 3.75% to 4%, its first hike since 2023.
Bitcoin surges 42% in Q3
Bitcoin was the standout performer in Q3, surging 42% as it executed a decisive technical and fundamental turnaround.
Q4 advice: Trim concentration risk
Trim concentration risk by reviewing how much of your portfolio rides on a handful of mega-cap growth stocks and consider adding domestic value and shorter duration bonds.
The short version
Headline equity indexes gained 2% in Q3 despite median stocks falling 15% below 52-week highs as rising yields and Fed tightening signal market risks ahead of Q4.
