September fulfilled its reputation as a tough month for investors. Markets continued their downturn from the first half of the month to end with moderate losses.
Last week the Federal Reserve (the Fed) concluded their most recent meeting. The Fed met market expectations and chose to “pause” interest rate hikes. However, comments by Fed Chairman Jerome Powell hinted that another increase was possible later this year (minutes from the meeting show that 12 of 19 officials favor one more rate hike this year). Additionally, the Fed signaled that rates may remain elevated for a longer period of time than previously anticipated.1 The Fed’s announcement led to a temper tantrum on Wall Street and drove market declines.
Adding to market pessimism is the unfolding drama in Washington DC surrounding a possible government shutdown. As of Friday’s close of markets, no budget deal has been reached. While it’s possible that a continuing resolution or partial government funding bill may be passed by the September 30th deadline, at least a partial shutdown seems inevitable.
What’s often missed in media reports is the silver lining of the above events. Regarding interest rates, the Fed has signaled that they are very close to the end of rate increases, which is causing pain in the stock and bond market. Furthermore, they are signaling their intention to cut rates several times next year, which is good for stocks and great for bonds.
As for a government shutdown, while this is certainly not good for Federal Workers or recipients of Government Aid Programs, the impact is much different on investors. Since 1978 there have been 6 government shutdown of 5 days or more. During the last 4 consecutive shutdowns the S&P 500 Index has posted gains.
Reviewing returns for the second half of September, the markets all fell. As of market close on September 29th, the Dow dropped 1,111 points (3.2%), the S&P 500 lost 162 points (3.65%) and the NASDAQ Composite Index (NASDAQ) fell by 489 points (3.57%).
1www.jhinvestments.com “Weekly Market Recap; Week ended September 22” September 25, 2023
The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Capital Analysts or Lincoln Investment. The material presented is provided for informational purposes only. Past performance is no guarantee of future results. No person or system can predict the market. There is no guarantee that any strategies discussed will result in a positive outcome. All investing involves risk and no investment strategy can guarantee a profit or protect against loss, including the potential loss of principal. S&P 500 Index is an index of 500 of the largest exchange-traded stocks in the US from a broad range of industries whose collective performance mirrors the overall stock market. The NASDAQ is an index that tracks the cumulative results on a market capitalization basis of all stocks trading in the NASDAQ system. The Dow Jones Industrial Average is a widely watched index of 30 American stocks thought to represent the pulse of the American economy and markets. Investors cannot invest directly in an index. Diversification does not guarantee a profit or protect against a loss.