Statistically speaking, September is the worst month of the year for stocks, and generally worse in midterm election years. However, August is often a bad month too, but this year’s 3% S&P500 gain was the best performance for the month in four years. If history is a guide, while September in midterm election years show varying results, generally the 4th quarter in these years is positive (16 out of 18 times going back to 1946)
This year, we have a number of competing factors at work.
On the positive side:
- The US economy is on solid ground, with low employment, high consumer confidence and consumer spending.
- Interest rates remain low – the 10yr US Treasury @ 2.85% is exactly where it was when this bull market started on March 9, 2009 (2.86%)
- In August, the stock market (basis S&P 500) became the longest bull market since WWII.
- History shows that bull markets don’t die of old age, they generally end when investors get overly enthusiastic. The previous longest bull market (1990-2000) ended with Federal Reserve Chairman Allan Greenspan warning of “irrational exuberance”. Since this bull market started in 2009, investors have consistently reduced their exposure to equities while allocating capital just about everywhere else, including record inflows to fixed income. This has been the most unloved bull market in history.
Market Returns and Fund Flows in Bull Market Periods
On the negative side:
1. The Federal Reserve is raising interest rates. If they succeed in slowly raising rates to keep inflation in check, things will be fine. If they raise too fast they will likely stall the economy. If they raise too slow, inflation likely rears its ugly head.
2. The current trade / tariff strategy in Washington could backfire and lead to a trade war. This would definitely throw a wrench into the economy.
3. Congress faces another budget deadline in September. Without an agreement, the Federal government will shut down for the third time this year.
4. European economy is struggling given some troubles in Turkey and Italy. If this expands to other countries it could impact global growth.
Given the above, we remain cautiously optimistic about the economy and financial markets. We continue to favor stocks over bonds, at least through the end of the year. We will adjust as circumstances dictate.
We hope you find this information helpful. Please share it with anyone you feel would benefit from it.
September Calendar of Events (comments and additions for future months are always welcome)
· Summer is over and kids are going back to school – please be careful on the roads.
Sep 3rd Labor Day
Sept 9th Rosh Hashana begins – wishing all our family, friends, and colleagues of the Jewish faith a very Happy New Year
Sept 10th World Suicide Prevention Day – Take a minute, Change a life – look out for those who may be struggling and check in with them
Sept 11th Patriot Day- honoring those who lost their lives on 9/11/01
Sept 12th Eloise and my 10th anniversary
Sept 19th Yom Kippur – G’mar Tov
Sept 21st International Day of Peace – consider lighting a candle for peace
Sept 22nd Autumn begins
Sept 30th Yom Kippur – G’mar Tov
Sources: CFRA, Blackstone, CNBC.com
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