As we enter a new week, month, and quarter, there are some positives for stock market investors to consider.
- First, the historically bad month of September is now behind us. On average, September tends to be the worst month of the year for the stock market. So far this year, that was the case. Now that September is behind us, it’s reassuring to know that the fourth quarter is typically the best three months of the year for the stock market.
- Second, the government avoided a shutdown over the weekend, at least for now.
- Third, the Federal Reserve’s preferred inflation measure, the PCE, now shows a 3% handle for both headline and core after last week’s release. The month-over-month number and the 3-month number were also encouraging.
Nonetheless, longer-term interest rates did rise last week — and for the month. The rising rates did impact stocks, as the global stock market lost about 4% last month. U.S. growth stocks led the losses lower. The only asset class higher for the month was the U.S. dollar. Interestingly, international stocks lost less than U.S. stocks, which is typically not the case when the U.S. dollar is stronger. For international to continue to outperform, though, the most likely short-term catalyst is that U.S. large-cap growth, like the Magnificent Seven, continues to underperform (which is plausible given the toxic combination of high valuations and rising interest rates).
There are still plenty of negatives to chew on, too: (1) the national debt hitting $33 trillion, (2) oil pushing north of $100 per barrel, (3) UAW strikes hitting the U.S. auto industry, (4) roughly 44 million in student loan debt starting their repayments, and (5) mortgage rates pushing 8% and a possible housing freeze.
As for potential market-moving events this coming week, beyond still watching interest rates we will get the latest monthly unemployment data on Friday. Expectations are for 170K in job growth and a 3.7% unemployment rate. Counterintuitively, it will take labor market deterioration for the bond market to start acting better, as investors will anticipate the fed will wait to cut short-term rates until that happens. The stock market will surely like that, too.
Add it all up...
Stay invested. Stay diversified. Stay disciplined.