As the weather turns a little cooler for us all this week as we enter September, it’s worth remembering that it’s a season of change for the stock market as well. According to Liz Ann Sonders of Charles Schwab, September has historically been the worst performing month for the S&P 500 with an average decline of 1.2%. Since 1928 it’s only finished higher than it started 43% of the time, which according to our math, is less than half the time! Considering the stock market averages returns yearly of nearly 9%, that’s quite the ominous statistic.
We’re mindful of these historic patterns as well as what could happen with the presidential debate season re-emerging after a pause. Because of these factors, we’re keeping tabs on the volatility in the stock market, which as of now, is actually quite low with the volatility index (the VIX) sitting in the 16’s. This was in the 50’s during the brief market drop at the beginning of August, so from that standpoint we are on much firming footing than we were, perhaps due to the clarity that Federal Reserve Chairman Jerome Powell gave to markets recently when announcing a dovish shift towards cutting rates at their next meeting.
As we analyze technical trends in the market, we’re seeing some positive data emerge. According to data from Charles Schwab, as of 8/30/24, no sector, with the exception of energy, has 70% of its constituent stocks below the 200-day moving average1. Overall, the S&P 500 is at 80% of its stocks above the 200-day moving average. Looking at the 50-day moving average the only sectors below 70% are again, energy, and information technology (just slightly below at 69%). These are bullish signs and give hope that the Federal Reserve, despite being very late to respond to high inflation in 2022 and being very reluctant to lower rates again in 2024, may actually pull off the so-called “soft landing” that stock market bulls have been screaming from the rooftops for over a year now.
Up next this week are the sore points in the market of Nonfarm Payroll numbers and ISM Manufacturing numbers, which when they came in poorly last month, briefly reversed the bullish trends we had seen in the months before. Will the numbers this month confirm a developing negative trend in economic data and foreshadow a potential recession? We shall see but know that we are monitoring vital signs such as these to try and keep our clients’ portfolios healthy. Please call us to share with us your questions or concerns as we’re always happy to discuss things with you.
Sincerely,
The WTA Investment Committee
1Source: Charles Schwab, Bloomberg, as of 8/30/2024. Past performance is no guarantee of future results.
