Market Report Fall 2023

The stock and bond markets ended lower during the third quarter.

Broadly measured, large U.S. company stocks declined 2.1%, small company stocks lost 4.8%, and foreign
stocks were down 3.3%. Bonds lost ground ending down 2.9%.

The principal factor weighing on the markets off-and-on over the last year-and-a-half has been the interest rate hike cycle orchestrated by the Fed in its effort to cool down the economy and thereby decrease inflation. The Fed is attempting to accomplish an economic “soft landing” and slow the economy enough to relieve inflationary pressures, while not slowing it so much that it slumps into recession.

The “soft landing” term entered the financial lexicon following the 1969 Apollo 11 moon landing.

Government officials were attempting to control inflation in the 1970s, as they are today. A contrasting economic factor between the two periods, which has fanned inflation over the last year, has been an unprecedented strong job market.

As COVID-19 restrictions phased out in 2022, demand for labor surged. More people working with more money to spend means increased demand and upward pressure on prices – otherwise known as inflation. There have been other factors at play, though low unemployment has been principal among them.

Since then, hiring has slowed down in 2023, and the cooling labor market is helping to bring down inflation, which is leading some to believe that an economic soft landing – and the avoidance of a recession — now may be more achievable.

The strong labor market has led to gains in wages and improved working conditions for many, particularly among the lowest-paid workers who have suffered the most from income inequality. While this is a positive development, it’s important to keep in mind that even with these gains, income and wealth disparity in the U.S. persists today to an extreme degree, particularly to the disadvantage of Black Americans.

August 28 marked the 60th anniversary of Dr. Martin Luther King’s “I Have a Dream” speech on the Mall in Washington D.C. The event that day became known as the “March on Washington,” though it was originally named the “March for Jobs and Freedom.”

An important part of the day’s agenda included the development of living-wage jobs. Speakers like A. Philip Randolph, the great labor organizer and civil-rights activist known for precipitating the end of racial segregation in the U.S. armed services, explained to the enormous crowd that the goal was not only to support the passage of civil rights legislation, but also to secure economic stability for Black Americans: “Yes, we want all public accommodations open to all citizens, but those accommodations will mean little to those who cannot afford to use them,” said Randolph.

This was a prescient insight recognizing the harmful, long-term, generational effects of systemic racism on the income and wealth prospects of the Black community.

According to the Wall Street Journal, in 2019, the median Black family held $23,000 in family wealth, compared to $184,000 for the median white family. In 2020, median income was $46,000 for Black workers compared to $75,000 for white workers. These disparities have remained essentially unchanged since 1963, the year of the March on Washington.

If collectively we believe this is fair and acceptable, then the current dismantling of affirmative action policies in higher education and the workplace makes some sense.

If, however, we believe that these inequalities are evidence of long-term systemic racism which has taken a cruel toll on Black workers, families, and communities, then opposing affirmative action rollbacks becomes an appropriate priority.

As of this writing, congress is again wrangling over federal budget shortfalls. If left unresolved, it may result in at least a partial shutdown of government operations. The viability of our financial system relies much on maintaining broad confidence in the system, confidence that is eroded by this sort of irresponsibility. We hope and expect that the cooler heads will prevail and resolution can be achieved.

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