As we progress through 2023, it increasingly feels that we are likely to remain in an elevated interest rates environment for the foreseeable future. Elevated rates are important, as they will affect the profitability of companies and the affordability of purchases financed by debt. In the third quarter, higher rates were a headwind, as both U.S and international stocks had negative returns, though they remain positive for the year. The U.S. economy has remained resilient, despite slowing growth. Higher interest rates were also a negative for bond returns in the third quarter, as they drove prices lower, especially for long-term bonds. However, we believe that this interest rate environment creates opportunity, as savers can be rewarded, and there is a compelling alternative to stocks in a diversified portfolio.
