Hello Folks
I typically don’t put out updates over the weekend, however I wanted this past week to “close out” before I did any analysis or assessment of things. We are two weeks away from exiting the historical stock market storm system, with associated turbulence and foul weather, called “September.” As discussed in prior posts, September is a month of poor performance and high volatility (huge price swings), and it apparently has chosen to keep its reputation this year.
This year’s September turbulence has two additional fuel sources, known as: 1) Presidential Election and 2) Interest Rates. As most realize, this is a very tight Presidential race, charged with emotion and with both candidates touting their own economic plans for the country.
Regarding Interest Rates, it is my opinion that the rates will not be raised at the September 20-21 Federal Reserve Open Market Committee (FOMC) meeting. You can read (if you are having trouble going to sleep) some of my theories and opinions on this matter via the search box on this site, however bottom line up front, the Jobs data and Core PCE Inflation data, is not where it needs to be, if the FOMC adheres to past policy statements made before Congress and at official press releases. Now, I suppose they could wake up one morning and deviate from those previously stated positions, but I am not sure how that would work out, even more so if you consider the tight campaign polls and other “backdrop” issues.
News did come out on Sept-16 regarding the Consumer Price Index (CPI), it rose 0.2% in August. This prompted some to speculate that this would be fodder for the FOMC to raise rates in September, but I get very frustrated by these sentiments, I wish those folks would review the public policy statements by the FOMC and adopt my conclusions. In addition, I would hope the FOMC would not take data received in September (the August CPI data) and take action on it less than 30 days later, an action with global implications. As I sit here typing this, I feel that the belief that August CPI will cause rates to rise in September is an absurd idea.
The SP-500 Index has had quite a few large swings, starting with the huge drop downward on September 9 on heavy volume. Note: No doubt, we have seen selling/distribution, on above average volume, with down-trending action, this month. None of which is desirable. Lets take a look at the SP-500 Chart:
The 2120 level is the new support level for the index, as apparent in the chart (red horizontal line), the index has found support there and closed above that level (thankfully) during last week’s trading. Any penetration down thru this level will be worrisome.
Yet again, the market action is “all about the Fed” (FOMC) and in an apparent cycle of lily pond jumping, the market’s big moves are all jumps from one FOMC lily pad meeting to the next one, with relatively flat action in between. We need a larger, more powerful force to sustain these trends, a force which apparently is non-existent right now. The next interest-rate events are the Sept 20-21 FOMC meeting (press conference will occur on Sept 21) and a panel/forum of Federal Reserve presidents will occur in Philadelphia on Sept 23, called the Presidents Perspectives Forum. I am quite certain that interest rates will be discussed directly, or at least alluded to, at that forum.
I remain 50% S-Fund and 50% C-Fund.
Please continue to share this site with your friends and colleagues, I appreciate the great email feedback, thank you very much. Thank you for reading and talk to you soon !
-Bill Pritchard
