Weekly Client Letter – November 6, 2023

The Federal Reserve recently decided to keep interest rates at a 22-Year high for the second time in a row. Fed Chair Jerome Powell, during a press briefing, showed caution, raising doubts about future rate hikes.

The U.S. job market has cooled off, and this is guiding the Federal Reserve’s approach. It suggests that interest rates will likely stay the same through December. This marks a change from the last four decades’ very aggressive rate-hiking campaign.

In the latest job report, the unemployment rate went up to 3.9%. Monthly wage growth has slowed, and nonfarm payrolls increased by 150,000, which is less than expected. September’s numbers were also revised downward. Although this slowdown might ease concerns at the Fed, there are still questions about the long-term impact of keeping interest rates high for a while.

Economic downturns often involve a shrinking job market and less job growth. We’ve been seeing early signs of this since the peak following the COVID-19 pandemic. Whether there will be a recession and how severe it might be is uncertain and beyond everyone’s control.

This is why investors should focus on factors they can manage, such as risk, and why here at Redwood, our RiskFirst® approach focuses on managing drawdowns to be within a client’s risk tolerance.

Cooling Job Market

Weekly Client Letter - November 6
Source: Bloomberg, Redwood. Data as of 11/3/2023. Date Range from 3/31/1939 – 10/31/2023. For illustration purposes only.
  • We believe the preservation of capital is key to consistent, long-term investment success.
  • Our investment approach is grounded in economic theory and backed by quantitative analysis.
  • Managing drawdown risk is a pillar from which we build our portfolios.

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