Ah September, the seasons are changing, the leaves are beginning to fall, football is back in full-swing, and Green Day can finally be woken back up at month’s end (somebody please get that reference). September also marks a unique time for markets as well. The dog days of summer are over and this time of year markets can experience a little more fun.
September 1st – The Pre-Labor Day Party
The first day in September brought some good news to investors looking to head out for the long weekend. Leading into September the main talking points were North Korea escalating tensions in the Pacific and debt ceiling discussions in Washington.
However, one of the main movers causing this pre Labor Day market exuberance was the biotech sector. We believe that this was due to the news that the FDA approved a new cell-based gene therapy to help combat cancer here in the United States. As the commissioner of the FDA Scott Gottlieb put it, “We’re entering a new frontier in medical innovation with the ability to reprogram a patient’s own cells to attack a deadly cancer.”
Pretty strong words for a pretty strong step forward in the biotech industry that continues to run as technology and medicine continue to push each other in the right direction.
All in all, as everyone was heading out of town the S&P 500 marched forward 0.20% and the MSCI improving 0.39% before the holiday weekend.
September 4th – 8th : Holiday Hangovers and Hydrogen Bombs
I swear I feel like half of these market recaps are talking about North Korea escalating tensions and the uneasiness they cause markets to feel and yet here we go again. Although rather than all that old and stale talk about ballistic missiles and nukes the North Koreans decided to switch it up this time; a hydrogen bomb!
Apparently Kim Jong Un wanted to up the ante a little bit this time with a test of North Korea’s first hydrogen bomb. And just as markets reacted rather unfavorably in the last war of words, the same happened during the week of the 4th.
Toward the end of the week yet another hurricane was bearing down on the US. Irma ravaged much of the Caribbean and set Florida in her sights. Going into the weekend there remained much uncertainty about the level of damage Irma would inflict once it made US landfall.
Taking into consideration all the shenanigans we had during the week, the S&P 500 was off 0.58% and the MSCI EAFE remained relatively unchanged being down a mere 0.03%.
September 11th – 15th : Post-Hurricane Recovery, Deescalating North Korea Tensions and NFL Football
Over the weekend, Irma took a trajectory further over Cuba and further west than many anticipated resulting in the storm being a bit weaker than first thought. Although there was some severe damage to parts of Florida Irma was not as catastrophic as investors believed it would be.
As a result markets recovered on Monday with The S&P 500 having a nice bounce of 1.19%.
In other news, the always hot and cold tensions with North Korea kept playing games with investors as markets responded positively to de-escalating tensions for the week. However, as you and I both know our friends from the North could pull a move anytime that could cause these tensions to fire off again.
If there is one thing you and I may count on in the coming months and that is North Korea could continue to cause markets to yoyo up and down in relation to how volatile relations with them are.
If there was some good news coming out of the weekend it was that NFL Football came back into full swing. NFL’s impact on the markets if any? Pepsi? Beer stock? Buffalo Wild Wings? Your guess is as good as mine.
September 18th – 22nd : The Fed Doesn’t Raise Interest Rates and the North Fired Another Missile
Much of the buildup leading to the week of September 20th was looking to what the Fed would do regarding interest rates, in particular potentially raising them. Interest rate increases are due to the Fed viewing the economy as becoming stronger, thus tightening monetary policy to correspond to this perceived strength in the economy.
How do investors typically see the raising of interest rates and tighter monetary policy you ask? Not favorably for the most part even though raising rates and tightening policy is a result of perceived economic strength by the Fed. Counterintuitive?… you betcha.
So when the Fed announces that they will leave interest rates relatively unchanged, markets and investors typically respond positively.
However, the long-term prognosis is that the Fed will continue to slowly increase rates with one possibly occurring before year’s end.
In other news, North Korea decided to fire another missile over Japan. Shocking right?
Markets were perceived as antsy once again at the continued geopolitical instability in the East.
For the week, the S&P 500 remained relatively unchanged gaining only 0.09% and global markets continued to outperform the US as the MSCI EAFE moved forward 0.70% for the week.
September 25th – 29th: I say Tomato, You Say Declaration of Nuclear War
Once again I’m a broken record but tensions with the North escalated once again over the weekend. This time with a much different twist, the North perceived President Trump’s statements as a declaration of war… well that was surely news to us here in the states.
I say tomato you say we’re at war, just a classic mix-up.
With declarations of war being imagined and North Korea giving itself the green light to defend itself against nothing, markets reacted relatively unfavorably on Monday the 25th.
In addition to North Korea’s self-declaration of war, the technology sector pulled back significantly on Monday. Members of the illustrious “FANG” stocks (Facebook, Amazon, Netflix, Google) lead the way down with the NASDAQ (a highly tech-focused stock index) pulling back 0.88%.
Tax reform was a hot topic on Capitol Hill Wednesday the 27th as President Trump and Republicans unveiled their new tax plan. Under the plan, corporations would be taxed at a lower rate and the number of tax brackets would be condensed.
Corporate tax cuts? Investors like the sound of that.
For the month of September the S&P 500 gained a nice 2.06% and the MSCI EAFE jumped 1.93% in the positive direction. Given all the volatility caused by tensions with North Korea and Hurricanes earlier this month I’d say September was a positive month all things considered.
Going in to October we will continue to be focused the “hot and cold” tensions with North Korea, the looming possibility of a Fed rate hike in December and some disheartening events that unfortunately lead off the month.
Any opinions are those of Jacob Dahlstrum and not necessarily those of RJFS or Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no assurance any of the trends mentioned will continue or forecasts will occur. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance is not indicative of future results. The S&P 500 is an unmanaged index of 500 widely held stocks. The MSCI EAFE (Europe, Australia, Far East) index is an unmanaged index that is generally considered representative of the international stock market. These international securities involve additional risks such as currency fluctuations, differing financial accounting standards, and possible political and economic instability. The NASDAQ Composite Index is an unmanaged index of all stocks traded on the NASDAQ over-the-counter market. It is not possible to invest directly in an index.