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Q3 Market Update

September 05, 2023

September is off to a modest start for the stock market due to China’s weakening economy, declining jobs data and more. What’s in store for the last quarter of 2023? How will potential interest rate hikes and new crypto tax reporting rules make an impact? We explore here.

On the first trading day of September, the Dow Jones Industrial Average, the S&P 500, and the Nasdaq composite all had modest gains to start the month. These returns follow the down month of August where all three indices lost ground for the first time since February[1].

What contributed to September’s weakness?

September has historically been the weakest month for equity returns[2]. There are several factors that can potentially contribute to September 2023 continuing this trend. China’s weakening economy, the downgrade of the US government’s debt by two credit rating agencies, declining jobs data with a corresponding modest increase in the unemployment rate and stubborn inflation.

However, there are some positive signs on the horizon. Consumers are continuing to spend, travel over the summer surged, and it seems that the Federal Reserve is continuing its balancing act of cooling down the economy without coming to a full stop.

Impact on our portfolios

We continue to believe that a diversified portfolio aligned with your personal goals and risk tolerance is the best course of action for the long-term. We remain slightly underweight to equities as volatility remains a factor in overall portfolio performance. Our move to lock in mid-term interest rates has helped our clients with a fixed income allocation.

Although we think there may be one or two more interest rate increases, we wanted to ensure that our clients benefited from the higher rates before the Federal Reserve may start cutting them. As I sit here at my desk looking forward to watching the Conanicut Yacht Club Around the Island sailboat race, which has been held annually since 1927, I cannot help but think that as far as our portfolios go that a “Steady as She Goes” philosophy is still appropriate at this time.

Crypto Tax Reporting

As many of you know, KLR Wealth Management, LLC does not make any investments in Crypto, but we have several clients who have done this on their own. For those of you who are holding Crypto assets, we thought it would be important to tell you that the Biden Administration has proposed new tax reporting rules for digital asset brokers.

These rules, if enacted, would require the preparation of a new form 1099-DA which would be sent to both the IRS and the taxpayer holding the digital asset. Under the proposal, the definition of a “broker” would include both centralized and decentralized digital asset trading forms. The Treasury Department proposed that these rules would be effective starting with the 2025 tax year. The Treasury Department and the IRS are accepting feedback on the proposal until October 30. They will also hold public hearings on the proposal on November 7-8, 2023. As we learn more about this, we will keep you updated.

I hope that everyone had a nice summer, even with all the crazy weather, and an enjoyable Labor Day weekend. As we turn our minds to apple cider and pumpkins [a diversified portfolio of fall treats], all of us at KLR Wealth Management, LLC want to thank you for your continued trust and confidence in our services. We remain committed to helping you become future ready.

Questions? Comments? We’d love to hear from you.


[2] Source: CFRA


The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not consider any investor's particular investment objectives, strategies, tax status or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on market and other conditions. This communication may contain certain statements that may be deemed forward looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability, or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

Generally, among asset classes, stocks are more volatile than bonds or short-term instruments. Government bonds and corporate bonds have more moderate short-term price fluctuations than stocks, but provide lower potential long-term returns. U.S. Treasury Bills maintain a stable value if held to maturity, but returns are generally only slightly above the inflation rate.

Diversification does not ensure a profit or guarantee against loss.

KLR Investment Advisors LLC (“KLRIA”) is a registered investment advisor. Advisory services are only offered to clients or prospective clients where KLR Investment and its representatives are properly licensed or exempt from licensure.

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