Stableford Capital Insights

Stableford Market Commentary: October 2022


After a brutal September, the S&P 500 bounced 8% during October. With the heightened fears of the Liz Truss UK debacle in September, news could not get any worse—and it didn’t. When market sentiment and fear reach extreme levels, a constant stream of bad news is required to push indexes down further. In the absence of further unwelcome news, markets bounced.

Graph showing Equities falling previously and bouncing eight percent in October
Exhibit 1 -Equities Bounced 8% in October

Fears were not just driven by a UK meltdown. Investors were concerned that 3Q earnings and future guidance would be weak. And while earnings were not strong, expectations had fallen to such extremely low levels that equities staged a relief rally despite major earnings disappointments in mega-cap tech.

It is also interesting to note that the rebound occurred despite a rise in U.S. Treasury yields which managed to move up 22 bps to close the month at 4.05%. During 2022 much of the weakness in equities has been driven by higher rates driving valuations down. The counter-trend move is all-the-more notable given that rates hit 4.33% intra-month.

Graph showing Bond Yields continuing to increase
Exhibit 2 – Bond Yields Increase 22 basis points to 4.05 percent

Can it Continue?

While the equities bounce brought relief October, the keys to the future are Fed policy and earnings. The Fed will remain hawkish, but we are getting closer to the end of the tightening. Futures markets are already pricing in over 5% fed funds rates in 2023. This is encouraging because we are approaching the time when fixed income rates will peak. As we near this apex, investing in fixed income will become increasingly attractive for both yield and potential price appreciation (recall that once yields peak and begin to fall, bond prices will increase). At Stableford we are warming to fixed income which has historically led the way out of economic downturns.

As for earnings, there is still wood to chop to get 2023 estimates down to more reasonable levels that make equities attractive. However, equities have made progress. We are encouraged by the large valuation adjustment that has already occurred in equities. Stocks are starting to trade at reasonable— and in some cases attractive—valuations. We still think it is early to embrace equities fully as we would like to see a larger earnings correction first. But we are encouraged that we are getting closer to that day.

Are you interested in making portfolio changes or getting a more in-depth analysis? Contact Stableford today by calling 480.493.2300 or simply request a copy of our Market Blast.


This market commentary was written and produced by Stableford Capital, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested in directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

S&P 500 INDEX: The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Justin Thomas
Justin C. Thomas has worked for over 15 years as a portfolio manager and analyst managing institutional assets for hedge funds and large financial institutions. Career highlights include 8 years as an equity analyst and portfolio manager at PartnerRe Asset Management, a global reinsurance company with $17 billion in assets under management, and prior to that managing a long-short equity portfolio for Citigroup’s proprietary account. Justin has also worked as an analyst at long-short hedge funds and in research for Montgomery Securities (Bank of America Securities). In addition, Justin Thomas gained operational experience while working in finance and operations at E-Stamp, a start-up in Silicon Valley. He began his career working as a CPA at KPMG. Justin has an MBA and Masters in Accounting from Northeastern University and an undergraduate degree in Economics from Tufts University.