Watch the CPK Market Action Report: September 2024
Following four straight winning months for the S&P 500, all three major averages closed higher again in August with the Dow Jones Industrials posting a record high on the last day of the month. As we enter one of the most volatile months of the year, investors will be looking to see if all three will continue their winning streak or if the historical volatility of September will just be too much to handle.
Watch the Market Action Report now:
Market Action Report
September 2024
Intro Tag
Following four straight winning months for the S&P 500, all three major averages closed higher again in August with the Dow Jones Industrials posting a record high on the last day of the month. As we enter one of the most volatile months of the year, investors will be looking to see if all three will continue their winning streak or if the historical volatility of September will just be too much to handle.
That action starts. NOW!
Index Performance
Solid U.S. earnings and strong economic reports allowed equity markets to cap off another strong monthly performance with the S&P 500 closing up 3.7%, the Dow Jones Industrials 3.01% and the Nasdaq Composite up 3.02%.
The news of the past three weeks has been positive, but the market is priced as though a soft landing, aggressive Fed rate cuts and extraordinary earnings growth are guaranteed. They are not guaranteed, and the totality of the actual news isn’t as good as the equity market would imply. It’s important to keep that context because if the market is forced to realize that (like the July jobs report forced it to back in early August) then another 5% air pocket in the S&P 500 shouldn’t be a surprise.
It is also important to note that since 1950, the S&P 500 has only finished higher in September 43% of the time. So, economic reports such as the jobs report and payroll will be critical at the first of the month for the rally to push through the month.
Bond Update
Strong economic data and a continued decline in inflation also pushed all bond yields lower this month. The 5yr closed at 3.71%, the 10yr at 3.91% and the 30yr at 4.19%. Markets continue to price in at least a 25-bps cut in September.
More importantly, the 10s-2s yield spread un-inverted for the first time in 2 years. Historically speaking, “un-inversions” after lengthy 10s-2s inversions have been a negative signal for stocks. Now, while market history doesn’t repeat itself, it often rhymes. And amidst this loud chorus of optimism, I want everyone to be aware of this historical precedent (which really is not good for stocks).
Noteworthy Events
Notable events coming up this month are August ISM Manufacturing, Service PMI, the Jobs report, JOLTS, ADP employment and jobless claims this Thursday. Any material negative changes in the labor reports could definitely reignite fears of a hard landing.
Wrap
As we enter what is known as one of the most volatile and worst performing months of the year, we find great comfort in our model’s current allocation of 50% in the money market. During election years, the heightened volatility usually doesn’t peak until mid-October. So, our defensive posture will allow us to have time to be patient and see what happens. However, it is common to see a relief rally into year-end after the election has finished.
Our Focus
For the month of September, our models continue to hold a 50% allocation to the money market.
Our broad focus remains on Domestic Equities and International Equities.
Our focus in Domestic Equities is on Large Cap Growth and Large Cap Blend with an emphasis on Financials, Industrials, Technology, Communication Services and Consumer Cyclicals.
In International Equities, our focus is on Europe Emerging and Europe Developed.
CPK DISCLAIMER
As a reminder, my current allocation is not a recommendation. Regardless of what happens next, investors like you need to have a simple and yet solid financial plan that reduces RISKS, COSTS and TAXES while securing the necessary income you need to maintain your lifestyle throughout retirement.
If you don’t have a plan OR you’re not comfortable with the plan you currently have, call me today to get pointed in the right direction.
I’m Chad Kunc and that puts a wrap on the September 2024 Market Action Report. Thanks for joining me. It’s time for me to get back to the markets.
And that action starts, NOW!