Model Portfolios | September Update

S&P 500 4507.66 :: 10-Year UST Yield 4.09% :: August 31, 2023

After rising steadily from the middle of March through late July, the stock market hit some turbulence in August, consolidating recent gains and resetting investor sentiment. The NAAIM Exposure Index measures member’s average exposure to U.S. equities. The index started August at its highest reading year-to-date and it ended August at its lowest reading year-to-date. August saw the AAII percentage of bullish investors (33.1%) drop back below the percentage of bearish investors (34.5%) as of August 30th.

The Fed is working to lower inflation by tightening monetary policy. This policy includes increasing the federal funds rate and shrinking the size of the Fed’s balance sheet. As shown in the chart below, the Fed has reduced its balance sheet by almost $1 trillion over the past 18 months.

At the Fed’s Jackson Hole Economic Symposium, Fed Chair Powell spoke about the progress the Federal Open Market Committee(FOMC) has made to lower inflation and he emphasized that further work remains to bring inflation down to the Fed’s 2% target level. Chair Powell noted that “Although inflation has moved down from its peak—a welcome development—it remains too high. We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”

The next FOMC meeting is scheduled for September 19th and 20th. The meeting will include an updated Summary of Economic Projections (SEP) from FOMC members. Fed Chair Powell has been clear that the FOMC is currently operating in a data-dependent mode with regard to future rate increases. Based on the latest CPI and PCE inflation reports, we think the Fed will keep the federal funds rate unchanged at the current 5.25% to 5.5% target range at the September meeting.

According to the latest NAHB/Wells Fargo Housing Market Index (HMI) release., builder confidence fell six points in August to 50, following seven consecutive months of gains in 2023. The HMI release noted that, “All three major HMI indices posted declines in August. The HMI index gauging current sales conditions fell five points to 57, the component charting sales expectations in the next six months declined four points to 55 and the gauge measuring traffic of prospective buyers dropped six points to 34.”

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Below is the monthly update of the Marketimer Model Portfolios and the Brinker Fixed Income Advisor Model Portfolios through August 31, 2023. This month we added the Marketimer Income Portfolio and the Marketimer Active/Passive Portfolio to our monthly updates. The Income Portfolio includes the changes detailed on page 3 of the final June 2023 edition of the Marketimer investment letter.