Well, we entered September this year in the stock market with analysts treading with caution: it’s historically a bad month for stocks, supply-chain issues are taking their toll on inventories and driving prices northward, the Federal Reserve is still behaving like inflation will blow away one day soon, China is cracking down hard on market risk-taking, and we’re overdue for a -5% correction anyway. Turns out almost all of this came to pass in the past 30 days.
We’re leaving September -4.2% on the Dow, even with the Energy sector closing higher for the month; -4.8% on the S&P 500, its worst monthly performance since the Covid meltdown in March 2020; and -5.6% on the Nasdaq, also its worst performance since March of last year. The Dow has sunk below 34K for the first time since the first day of summer, the S&P pushing close to a floor of 4300 for the first time in two months, and the Nasdaq below 14,500 for the first time since July.
What may be tempting to do is blame today’s sell-off on news out of Washington DC, where plenty of uncertainty remains as political gamesmanship clouds policy initiatives passing both houses. Yet following the vote to keep the government from shutting down this afternoon, the indexes sold off even further — worst off was Tech, which accounts for the Nasdaq underperforming the other major indexes.
Worst off of all was the Materials space, which lost -7% this past month. Again, supply-chain constraints are the reason for stocks in this industry on the wane. The silver lining for this dark cloud appears to be that demand remains strong; yes, this is helping bolster pricing to levels of more than 4% overall (double the Fed’s objective optimum), but it also fairly ensures that buying will continue into Q4 and likely beyond, prolonging the overall Great Reopening.
More good news? The Delta variant appears to be ebbing, as well. We saw whole chunks of the U.S. — particularly in the South and the Midwestern Plains, where vaccination rates had been particularly low — losing business, even on the demand side, as Covid refused to fade off into the night sky. We might also count as good news the lower levels of stocks for the past month themselves: buying opportunities abound, including in companies with excellent balance sheets and business models.
We’ll begin October market activity with a bevy of fresh economic reports, including Personal Income & Spending, Core Inflation, Manufacturing from both PMI and ISM, Construction Spending and Consumer Sentiment. Plenty of grist for the mill. Now looking at the market through our new prism of having shed that -5% analysts had been looking for, even modestly OK news from these metrics may provide reasons for the market to trade higher.
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Taking Stock of a Gloomy September
Well, we entered September this year in the stock market with analysts treading with caution: it’s historically a bad month for stocks, supply-chain issues are taking their toll on inventories and driving prices northward, the Federal Reserve is still behaving like inflation will blow away one day soon, China is cracking down hard on market risk-taking, and we’re overdue for a -5% correction anyway. Turns out almost all of this came to pass in the past 30 days.
We’re leaving September -4.2% on the Dow, even with the Energy sector closing higher for the month; -4.8% on the S&P 500, its worst monthly performance since the Covid meltdown in March 2020; and -5.6% on the Nasdaq, also its worst performance since March of last year. The Dow has sunk below 34K for the first time since the first day of summer, the S&P pushing close to a floor of 4300 for the first time in two months, and the Nasdaq below 14,500 for the first time since July.
What may be tempting to do is blame today’s sell-off on news out of Washington DC, where plenty of uncertainty remains as political gamesmanship clouds policy initiatives passing both houses. Yet following the vote to keep the government from shutting down this afternoon, the indexes sold off even further — worst off was Tech, which accounts for the Nasdaq underperforming the other major indexes.
Worst off of all was the Materials space, which lost -7% this past month. Again, supply-chain constraints are the reason for stocks in this industry on the wane. The silver lining for this dark cloud appears to be that demand remains strong; yes, this is helping bolster pricing to levels of more than 4% overall (double the Fed’s objective optimum), but it also fairly ensures that buying will continue into Q4 and likely beyond, prolonging the overall Great Reopening.
More good news? The Delta variant appears to be ebbing, as well. We saw whole chunks of the U.S. — particularly in the South and the Midwestern Plains, where vaccination rates had been particularly low — losing business, even on the demand side, as Covid refused to fade off into the night sky. We might also count as good news the lower levels of stocks for the past month themselves: buying opportunities abound, including in companies with excellent balance sheets and business models.
We’ll begin October market activity with a bevy of fresh economic reports, including Personal Income & Spending, Core Inflation, Manufacturing from both PMI and ISM, Construction Spending and Consumer Sentiment. Plenty of grist for the mill. Now looking at the market through our new prism of having shed that -5% analysts had been looking for, even modestly OK news from these metrics may provide reasons for the market to trade higher.
Questions or comments about this article and/or its author? Click here>>