Take Five: A September to remember?
Investors are hopeful that September will bring an end to the rise in interest rates, but the month is filled with risk events, making it potentially volatile for both stocks and bonds.
/cloudfront-us-east-2.images.arcpublishing.com/reuters/4ZJGQWUIWROOBIGMMEU6IQSZCQ.jpg)
Topics
Posted 9/1/2023, 9:13:45 AM
reuters.com
Relevant topic timeline:
The majority of economists polled by Reuters predict that the U.S. Federal Reserve will not raise interest rates again, and they expect the central bank to wait until at least the end of March before cutting them, as the probability of a recession within a year falls to its lowest level since September 2022.
A stock market rally is likely to occur in the near future, as recent data indicates that a bounce is expected after a period of selling pressure, with several sectors and markets reaching oversold levels and trading below their normal risk ranges. Additionally, analysis suggests that sectors such as Utilities, Consumer Staples, Real Estate, Financials, and Bonds, which have been underperforming, could provide upside potential in 2024 if there is a decline in interest rates driven by the Federal Reserve.
Despite recent market gains, investors are concerned that the current rally may be the last hurrah before an economic contraction, especially after the Federal Reserve indicated that it could hike interest rates twice more this year.
The cryptocurrency market is preparing for a potential larger financial event in September that could significantly impact Bitcoin, Ethereum, XRP, and the wider digital asset landscape.
Philadelphia Federal Reserve Bank President Patrick Harker suggests that the central bank may maintain steady interest rates in September and for an extended period of time to allow previous rate hikes to continue lowering inflation.
Traders are expecting a volatile start to the week as policymakers from the US and Europe indicate that interest rates will likely remain higher for a longer period of time, leading to increased yields on bonds and a weakening of the yen.
Investors have been building up bets on the Federal Reserve announcing an end to its rate hikes, but the central bank's preferred inflation data and Chair Jerome Powell's comments suggest that the cycle may not be over yet.
Stocks started the final week of August on a positive note, but September is historically a bad month for stocks and analysts are warning of more turmoil ahead for the market.
September has historically been a difficult month for stocks, with the S&P 500 and Nasdaq experiencing negative returns on average, but a pullback in September doesn't necessarily mean stocks will stumble for the rest of the year if the economy remains resilient and the Federal Reserve is done hiking rates.
The Federal Reserve meeting in September may hold the key to the end of the tightening cycle, as markets anticipate a rate hike in November, aligning with the Fed's thinking on its peak rate. However, disagreement among Fed policymakers regarding the strength of the economy and inflation raises questions about the clarity and certainty of the Fed's guidance. Market skeptics remain uncertain about the possibility of a "soft landing," with sustained economic expansion following a period of tightening.
September historically has been the worst performing month for the U.S. stock market, and with the recent decline in August, investors should prepare for further volatility and potentially disappointing results in September.
Stocks are expected to rally next month, with the S&P 500 potentially reaching its previous highs, according to Fundstrat's Tom Lee, who cited reasons such as a cooling economy, no further interest rate hikes from the Fed, overly bearish sentiment in August, and historically strong performance in September.
Stocks on Wall Street rose as the head of the Federal Reserve indicated a cautious approach to interest rates, resulting in the first winning week for the market since July.
September is historically the worst month for stocks, and with mounting fears in the market, Evercore's Julian Emanuel advises investors to remain defensive until a potential buying opportunity arises in October.
Bitcoin investors may face a turbulent September, but analysts suggest looking towards mid-October for potentially positive market movements.
September has historically been the worst month for stocks, but this year may be different as the excitement around AI, cash on the sidelines, and Apple's new iPhone could potentially drive positive market performance.
The coming week is expected to be lighter for investors, with the Federal Reserve's interest rate decision being the highlight, as US markets observe Labor Day and updates on the services sector and corporate earnings are anticipated.
The author argues against the common belief that rising interest rates and a rising dollar will negatively impact the stock market, citing historical evidence that contradicts this perspective and emphasizes the importance of analyzing market reality rather than personal beliefs. The author presents a bullish outlook for the market, with a potential rally towards the 4800SPX region, but also acknowledges the possibility of a corrective pullback.
Wall Street is optimistic about the September trading month, but there are concerns about falling consumer confidence data and a potential recession next year, according to Commonwealth Financial Network Chief Investment Officer Brad McMillan.
Major companies are becoming more cautious about borrowing in a higher interest rate environment, leading to a decrease in corporate bond issuances.
Investors are becoming increasingly nervous due to concerns about the Fed potentially increasing interest rates, as well as rising 10-year interest rates and the VIX, which may put pressure on stocks; however, there are also positive factors emerging, such as improving S&P 500 profit estimates and a shift away from data dependence by Fed officials, which suggests a better finish to September is probable.
Investors should prepare for increased market volatility next week as the stock market faces multiple risk events, including U.S. CPI inflation, retail sales figures, and wholesale prices, which will impact the Federal Reserve's policy outlook.
The European Central Bank is expected to maintain interest rates on September 14, although nearly half of economists anticipate one more increase this year in an effort to reduce inflation.
Stocks may still be vulnerable in September, despite the buzz generated by Arm going public and the lousy market month of August.
September historically has been a challenging month for stocks, but reduced concerns about a recession, signs of a potential shift in Fed policy, and positive sector trends point to the possibility of strategic investment opportunities this year.
The US sectoral flows for August 2023 have shown a significant decrease in financial balances, which is expected to negatively impact asset markets heading into September and potentially October, with a potential turnaround in markets expected in October. The upcoming mid-September federal corporate tax collections are likely to further decrease financial balances in the private domestic sector. The federal government's spending and credit creation, along with bank credit creation, will play a role in the future trends of asset markets. The real estate market is also showing signs of slowing down due to rising interest rates. Overall, the macroeconomic indicators suggest a strong Xmas/New Year rally and a positive first quarter of 2024 for asset markets.
The Federal Reserve Bank of New York's recession probability tool, which examines the difference in yield between the 10-year U.S. Treasury bond and three-month bill, suggests a 60.83% probability of a U.S. recession through August 2024, indicating that stocks may move lower in the coming months and quarters. However, historical data shows that U.S. recessions are typically short-lived, and long-term investors have little to worry about.
Traders and investors are betting that the Federal Reserve will hold interest rates steady at its September meeting, indicating a shift in the market's interpretation of good economic news, as it suggests the Fed may be close to pausing its rate hike cycle despite inflation being above target levels and potential headwinds in the economy.
The stock market is currently stagnant and the key question is when the Federal Reserve will start cutting interest rates, as the market struggles when the Fed tightens monetary policy.
Amid indications that the bond market is betting on higher interest rates for a longer period, some investors are placing bets on the economy hitting a wall and a potential reversal in policy in the near future.
Following the European Central Bank's record high interest rate hike to 4%, there is speculation about how long rates will remain at this level, with analysts predicting a 12-month pause before any cuts are made, while also considering the impact of rising oil prices on inflation expectations in Europe and the US. The Federal Reserve is expected to hold rates steady in September, but there are divided opinions on whether another hike will be delivered this year, with markets anticipating rate cuts in 2024. Similarly, the Bank of England is anticipated to make one final hike in September as it assesses inflation and economic indicators.
The Federal Reserve's plans for prolonged elevated interest rates may continue to put pressure on stocks and bonds, although some investors doubt that the central bank will follow through with its projections.
The possibility of a last hike in 2023 with the pause in interest rates in September may lead to the tightening and financial conditions that were not seen earlier when the Fed was raising rates faster.