Hello all - we hope you had a nice September.
Stocks turned in yet another higher month. The Dow saw a gain of 1.9%, the S&P 500 rose 3.7%, and the Nasdaq, which has a higher concentration of tech stocks, added a solid 5.6%.
Stocks turned in yet another higher month. The Dow saw a gain of 1.9%, the S&P 500 rose 3.7%, and the Nasdaq, which has a higher concentration of tech stocks, added a solid 5.6%.
Here’s a look at how the markets moved this month:
Here’s a look at the performance of the various sectors in the market:
Interestingly, the market continues to trade in the tight range we’ve seen the last several months.
Gold has been a big story, too, as it keeps climbing to new record highs.
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The markets are becoming more and more concentrated, with a few big names getting bigger and the rest of the market languishing.
The five biggest stocks in the S&P 500 now make up nearly 30% of the index (Nvidia, Microsoft, Apple, Google, and Amazon). Keep in mind, there are 495 other stocks in this index!
The ten biggest stocks are now 40% of the index!
While these big names are successful companies, it’s not healthy for a market to have such a high concentration of stocks. Markets become more volatile and can fall sharply in these scenarios.
In fact, the market continues to rise while fewer and fewer stocks are doing well. In a healthy scenario, markets rise and more stocks should be above their recent average. That’s not the case today. Below is a chart showing fewer stocks above their recent averages.
In fact, the market continues to rise while fewer and fewer stocks are doing well. In a healthy scenario, markets rise and more stocks should be above their recent average. That’s not the case today. Below is a chart showing fewer stocks above their recent averages.
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TRADERS ALMANAC
An interesting quirk in the markets is the time between the Jewish holidays of Rosh Hashana and Yom Kippur. The trader’s almanac says to sell stocks on Rosh Hashana (this year on Sept. 22) and buy them on Yom Kippur (Oct. 2).
Why?
Like any of these trends, it’s hard to know exactly. This year, though, we had options expiring just before Rosh Hashana, so selling may have happened after that. This is also the end of the most volatile month and quarter, so that may play a part, too.
As you can see in the chart below, selling on Rosh Hashana would have been an ideal time to do so. Let’s see if October 2nd turns out to be a good time to buy!
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FED
The Fed held a policy meeting this month and announced a highly-anticipated rate cut for the first time this year. He cited weakness in the job market as the reason for doing so.
The market seems to be expecting more rate cuts this year, but we aren’t so certain. A failure to announce more cuts is certain to see stocks fall on the news.
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INFLATION
Inflation data out this month showed inflation continuing to pick up.
When we look at inflation on a month-to-month basis, prices continue to rise.
When excluding energy and food from the calculation (which economists call the “core” measurement), inflation rose steadily yet again.
Inflation at the business level has been very volatile lately. At least this month there was a decline in prices, which may result in a lower CPI in the future.
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OTHER ECONOMIC DATA
Other economic data released this month showed a mixed picture.
The jobs picture looks terrible. The number of new jobs has been trending lower and the last four months have seen very few jobs added.
With a more granular look at the economy, both the manufacturing and service sides of our economy saw modest increases.
Retail sales moved higher again:
Durable goods (these are items with a longer life, like a phone or refrigerator) also saw a slight increase.
Consumer confidence moved slightly lower.
However, small business owners are increasingly more optimistic.
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Where does the market go from here?
October can be a volatile month for stocks, but its also historically a good month to buy as stocks rise into the end of the year. Right now, stocks look to be a little expensive, but the trend has been steadily higher so we may keep climbing from here.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
