September trading trends: Fed"s influence and market dynamics
- September is historically the worst month for major U.S. stock indices, with the S&P 500 showing declines in recent years.
- Despite this, many stocks performed well in August, and earnings reports indicate strong growth.
- The Fed's focus on the job market and potential rate cuts may provide support for the market amid seasonal challenges.
September is historically the worst month for major U.S. stock indices, including the Dow Industrials, S&P 500, NASDAQ, and Russell 2000, as noted by the Stock Trader's Almanac. Recent performance data shows a downward trend for the S&P 500 in September over the past few years, with declines of 5% in 2023, 9% in 2022, 5% in 2021, and 4% in 2020. The upcoming elections add uncertainty to market dynamics, as they can influence investor sentiment and stock performance. Despite the historical challenges of September, there are positive indicators in the market. In August, two-thirds of the S&P 500 stocks saw gains, and over 70% of NYSE stocks are above their 200-day moving average. While megacap tech stocks had a mixed performance, with Meta showing a notable increase of 9.8%, other sectors like Consumer Staples, Real Estate, and Health Care led the market with significant gains. Earnings reports remain robust, with a 13% increase in Q2 2024 S&P earnings, and estimates for Q3 also look strong. The Federal Reserve's recent focus has shifted from combating inflation to monitoring the job market, as articulated by Chairman Jerome Powell at Jackson Hole. This shift suggests that any signs of job market deterioration could prompt the Fed to implement rate cuts. The prevailing belief in a 'Fed put' is fostering a bullish sentiment among investors, as they anticipate that any market sell-off due to job concerns will be temporary, supported by the Fed's intervention. This dynamic creates a complex landscape for traders as they navigate the challenges of September alongside the potential for Fed support.