Cela's Weekly Insights - September 24, 2023

As we step into the final week of September, we are, once more, met with its historically diminished returns, a phenomenon known as the "September Effect." Historically, this month has recorded the weakest stock market returns for nearly a century, a trend that persisted this week as both the S&P 500 and Nasdaq posted their third successive week of losses.

So, what exactly happened this week? The Federal Reserve convened for its September meeting, with Jerome Powell delivering a clear message: elevated rates will persist until there is convincing movement toward 2.0% inflation. While rates remained the same (5.25%-5.5%) at this meeting, an additional rate hike (probably in November) remains a possibility. Moreover, the Fed’s latest projections suggest fewer potential rate cuts in 2024, signaling that the high-interest-rate environment could extend longer than previously thought, with market anticipation for the first rate cut now deferred to July 2024 from June.

The market responded promptly to the Fed’s somewhat rigid outlook, with 10-year-US-Treasury-yields rising sharply, going as high as 4.49% on Thursday and closing the week at 4.44% on Friday. This development pressed down both stock and bond returns, causing sectors with longer durations, such as technology and growth, to lag behind the broader market.

This rise in yields is also occurring amidst worries over inflated valuations, notably within the large-cap tech sector and the “Magnificent 7” (Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, Tesla). Initial excitement around artificial intelligence propelled these stocks, but now, with valuations appearing overstretched, they are challenged by the prevailing high-rate environment. Additionally, the looming specter of potential government shutdowns and ongoing UAW strikes add to the walls of worry, potentially elevating near-term uncertainty.

Last Week's Market Performance: A Global Overview

Last Week's Survey Results | Calendar Week 38/2023

Last week, we saw some interesting shifts in our S&P 500 poll. On LinkedIn, 61% of participants were feeling positive, down from 64% the week before. On Instagram, more people were feeling good, with positive responses going up from 80% to 89%. But, even with some participants feeling hopeful, the S&P 500 had its third down week in a row, dropping by 2.93%.

You can still vote here in this week's poll.

Cheerio!

Endrit Cela The Investment Fella - #ECB #mm #411 ??