Market at a Glance - 8/31/2023
By: Christopher Mistal
August 31, 2023
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Please join us for an Almanac Investor Member’s Only discussion of recent market action with time for Q & A at the end. Jeff will cover his outlook for September, review the Tactical Seasonal Switching Strategy ETF, Sector Rotation ETF, and Stock Portfolio holdings and trades. We will also share our assessments of the Fed, inflation, the "Worst Months" as well as relevant updates to seasonals now in play.
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Market at a Glance
8/31/2023: Dow 34721.91 | S&P 4507.66 | NASDAQ 14034.97 | Russell 2K 1899.68 | NYSE 16000.37 | Value Line Arith 9442.99
Seasonal: Bearish. September is the worst DJIA, S&P 500, (since 1950) NASDAQ (since 1971) and Russell 2000 (1979) month of the year. Typically, bullish pre-election year strength does not help September as its ranking and performance remain at the bottom in pre-election years. End-of-Q3 portfolio restructuring has contributed to late-month weakness.
Fundamental: Not great. Q2 GDP was revised lower to 2.1% from 2.4% while July’s PCE was in line with expectations. Inflation’s trend lower is being challenged by an uptick in readings for July, but its broader trend appears to remain intact, but still above the Fed’s 2% target. Recent employment data hints of some modest cooling which is keeping the possibility of a soft economic landing alive. Oil above $80 per barrel and the Atlanta Fed’s GDPNow model forecasting growth over 5% in Q3 are two concerns. Both could impede the Fed’s inflation fight.
Technical: Bouncing. Market conditions were well set up for a mid-month bounce. DJIA, S&P 500 and NASDAQ had all retreated from their respective July/early August highs. The brisk retreat ended shortly after mid-month when support was found, and technical indicators were near or at oversold levels. The market could struggle as traders and investors look to avoid headline risk ahead of the 3-day Labor Day weekend.
Monetary: 5.25 – 5.50%. Recent comments from Fed officials indicate they are still very much concerned about inflation, but remain data driven. Currently the odds of another rate hike in September are essentially zero, but they are creeping higher for November’s meeting. The higher rates go, the more of a drag they will be on the economy and the market. 5%+ without the volatility of stocks is increasingly attractive.
Sentiment: Retreating. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors stand at 43.1%. Correction advisors are at 36.1% while Bearish advisors numbered 20.8% as of their August 30 release. This is a marked decline in bullish sentiment since late July when bulls numbered 57.1%, but the number of bulls is still high compared to historical levels seen around the better buying opportunities.