U.S. Market Will Have To Contend With Regime Of High Interest Rates

Investors are struggling to make peace with a new reality: Interest rates are likely to remain higher for longer.

Stocks have tumbled, government bond yields have risen, and the US dollar has climbed since Federal Reserve officials signaled two weeks ago that they might hold rates near current levels through 2024.

Stocks have tumbled, government bond yields have risen, and the US dollar has climbed since Federal Reserve officials signaled two weeks ago that they might hold rates near current levels through 2024, Hardika Singh wrote for The Wall Street Journal.

Entering the fourth quarter, the S&P 500 is holding on to a 12% advance for the year, but much of the enthusiasm that characterized markets in the first half has largely disappeared.

“It’s a whole different mindset,” said Sandi Bragar, Chief Client Officer at the wealth-management firm Aspiriant. “Investors knew this was a possibility, but they were choosing to ignore it.”

Investors will be looking at Monday’s manufacturing data and Friday’s monthly jobs report as they try to assess the strength of the economy and the market’s trajectory.

Bonds had a historically terrible year in 2022. Those who bet 2023 would be better have been wrong thus far.

Government bond yields, which move inversely to prices, started climbing again in July when a flurry of stronger-than-expected data persuaded investors that the Fed would have to keep interest rates elevated to cool the economy.

Then in August, the government said it would sell many more Treasurys in the coming months than investors expected, extending the summer losses and forcing traders to reassess their outlook for the market, Alana Pipe and Ken Jimenez also reported for The Wall Street Journal.

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