09/03/2024 | News release | Distributed by Public on 09/03/2024 13:26
Major U.S. stock averages put in a mixed week of performance but finished higher in August following a rocky start to the month. NVIDIA's earnings report and outlook last week easily surpassed analyst expectations. However, the stock fell on the week (down nearly 8.0%), as the rate at which it usually hurdles over profit estimates continues to shrink. A second look at Q2 U.S. GDP showed stronger growth than initially reported, and the Fed's preferred inflation measure for July fell in line with expectations. In the background, investor sentiment has improved from the July/August lows. Yet, there is a cautious tone across the market heading into a historically weak September, with key data and events offering opportunities for periods of elevated volatility as the summer winds down.
Last Week & Month in Review:
UGH! It's September.
Historically, September has been a challenging month for stocks. Over the last four years, the S&P 500 has dropped 4.9%, 9.3%, 4.8%, and 3.9%, respectively, in September. Those significant declines have contributed to producing a ten-year average S&P 500 September decline of 2.3%, which, by far, is the worst month for stocks over the measured period.
Over the last twenty years, the average S&P 500 September decline falls to 0.7% but remains the worst month of the year for performance. Notably, some defensive sectors have risen to the top of the performance charts over recent weeks. In our view, it's not surprising near-term investors/traders are positioning a little more cautiously ahead of a pretty volatile month historically.
Bottom line: With key macroeconomic reports on the horizon (August nonfarm payrolls on Friday and August CPI on September 11th) followed by an FOMC policy decision on September 18th, there are ample opportunities for increased volatility. And the likely ramp higher in political rhetoric pre-and-post the Harris/Trump debate on September 10th is also a near-term volatility risk, in our view.
But importantly, we believe that's all "noise" that distracts from the still solid fundamentals across growth and profits that could help stocks navigate through a period of volatility and into a seasonal period where historical trends are more favorable for asset prices. On average, the October-December period is the S&P 500's strongest three-month stretch, gaining +1.8% over the last ten years. In our view, investors should remain focused on using volatility to their advantage. Importantly, lean on time-tested dollar-cost averaging strategies and portfolio diversification to weather a potentially bumpier push into year end.
The Week Ahead:
This week's employment data, including the August nonfarm payrolls report on Friday, could help shape whether the Federal Reserve delivers a "jumbo-sized" rate cut later this month. Odds predominantly favor a 25-basis point rate cut on September 18th, but outsized weakness in labor trends could prompt officials to begin the rate-cutting cycle more aggressively than markets anticipate.
Important Disclosures
Sources: FactSet and Bloomberg. FactSet and Bloomberg are independent investment research companies that compile and provide financial data and analytics to firms and investment professionals such as Ameriprise Financial and its analysts. They are not affiliated with Ameriprise Financial, Inc.
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