The financial landscape in September has been tumultuous, marked by significant dips and rising uncertainties. The September downtrend in the stock market persists, with the S&P 500 nearing a critical technical juncture at 4328. Should it breach this mark, the subsequent safety net is pegged around 4056. This week has witnessed the S&P 500 and the Nasdaq Composite decline by 2.7% and 3.5%, respectively, marking their poorest performance since March and their third consecutive negative week. Meanwhile, the Dow Jones Industrial Average has receded by 1.6%.
On the backdrop of these numbers, bond yields saw a significant spike, following the central bank’s hawkish statement of another rate hike in 2023. The 10-year Treasury yield soared to 4.498% – a level unseen since 2007, while the 2-year rate touched 5.2%, its peak since 2006.
Adding to the market’s jitters is the looming threat of a government shutdown. This political quagmire threatens to erode consumer confidence and further dampen economic activity. As George Goncalves of MUFG noted, the risk landscape has heightened, and with the specter of a government shutdown, the market might witness further turbulence.
Historically, September leans bearish, and with six trading days remaining, multiple challenges persist. From the prolonged labor issues (strikes), the probability of a government shutdown, to the overarching pessimistic political atmosphere, the market is awash in uncertainties. Concerns like inflation and high fuel prices are also weighing heavily on Americans.
However, there’s a silver lining:
- The labor issues and strike impasses are expected to find a resolution in the coming 2-3 months.
- Debt-ceiling and budgetary hurdles are likely to be overcome soon.
- Inflation seems to be receding, evidenced by softening housing market trends and the effects of recent rate hikes.
- While energy prices are elevated, solutions abound. Increased production, OPEC decisions, and burgeoning energy technologies can recalibrate the status quo.
- Corporate austerity measures might soon give way to growth agendas, exemplified by Cisco’s acquisition of Splunk and the reinvigoration of the IPO market.
- Apple’s upcoming iPhone, while not having generated as much buzz as its predecessors, indicates an industry shift from cost-saving to growth and innovation. Nvidia’s explosive earnings growth is also a sign of where innovative technology still can be highly profitable.
- Despite the gloom, earnings projections remain largely positive.
In these uncertain times, the market is seeking clarity. Many believe that as ambiguities dissipate, a shift towards more definitive market drivers will ensue.
For astute Fiscal Investors, the present calls for a focus on value stocks offering attractive dividends. With treasury yields hovering around 5%, dividend stocks present an enticing income avenue with potential capital appreciation. The current interest rate scenario makes growth-centric and tech stocks a challenging proposition. As Fiscal Investors, it’s paramount to strategically position ourselves, capitalizing on dividends while remaining open to growth as the market rebounds.
This is an exciting time to be position building. Stay focused on the long-term with discipline, patience, and education.