July 11, 2024

September’s Stock Market: A Rollercoaster Ride Ahead?

Nasdaq Composite, Image Credits: FOX Business

After a rollercoaster in August in the markets, global investors are closely watching September. Last month, the S&P 500 and Nasdaq snapped a five-month winning streak, and the Dow Jones Industrial Average posted its worst performance since May, according to Dow Jones Market Data Group.

Despite this pullback, U.S. equities have delivered a strong performance this year, with the Nasdaq leading the way, boasting gains of over 34%. Companies like Nvidia, Apple, Amazon, and Tesla have contributed significantly to this impressive performance.

However, amidst this backdrop of uncertainty, Tony Roth, Chief Investment Officer at Wilmington Trust, expressed a cautious perspective in a recent interview with FOX Business. Roth stated, “We also don’t think that rates are going to come down quickly, and we also believe that valuations are pretty stretched for U.S. equities, at least on an index level,” Roth said. “So, we’re pretty cautious as it relates to the market, even though we’re pretty optimistic as it relates to the economy.” 

The U.S. job market report for August indicated the creation of 187,000 jobs, with the unemployment rate rising to 3.8%. Though considered solid by many, this report raises questions about the economic landscape.

While Roth anticipates a soft landing for the economy rather than a severe one, he advises exploring alternatives in today’s high-risk environment. “You have a lot of money that can do quite well and after an inflation basis hiding out in cash or very short-term, high-quality bonds,” he noted. “In an environment where you’re seeing global growth come in lower than expected, you’re seeing stagflation, the very clear stagflation scenario coming out of Europe. You’re seeing China in deep economic trouble right now. All that would suggest that there is an opportunity for some real sell-offs in the market.”

Traditionally, September has been known as the worst month for the Dow and S&P 500 since 1950, as per the Stock Trader’s Almanac. However, this year may see investors in a holding pattern due to certain factors. “We don’t have any earnings to start for another five weeks or so. You’ll have one Fed meeting in the middle of September, but it’s pretty much baked in the cake that they’re not going to do anything. It’ll all be about their language,” commented New York Stock Exchange Trader Tim Anderson during an interview on “Cavuto: Coast to Coast.”

The Federal Reserve is set to meet on September 20, with over 94% of market participants expecting policymakers to maintain current interest rates, according to the CME’s FedWatch Tool. 

However, Chairman Powell cautioned last month, “Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy” during the Federal Reserve Bank of Kansas City Jackson Hole Economic Policy Symposium.

As investors navigate these uncertain waters, all eyes will be on the evolving economic landscape and the language of the Federal Reserve in September.

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