Today’s Market Update — Blackhawk Wealth Advisors
Today’s Market Update
October 1, 2021
Flat Quarter & Bad Month
A September NOT to Remember
TGIF! is about the best way to cap off a rough week, month, and quarter for the U.S. stock market. September was certainly a hard month for stocks, with all the major indexes closing out one of their worst months of the year. The S&P 500 finished September down nearly 5%. This was the index’s worst month since March 2020. September has proved to be a hard month for stocks, historically speaking. Since 1950, the Dow Jones Industrial Average (DJIA) has averaged a decline of 0.8%, according to the Stock Trader’s Almanac. The “September Effect” was clearly way worse this September. Again, TGIF! Today the market rallied from the recent sharp sell-off, gaining nearly as much as it did in the entire 3rd quarter of 2021.
The stock market’s price and volume action since early September has resulted in a change of its general trend. Its current signal shifted yesterday to “Market in Correction”. This was preceded by the major indexes and leading stocks suffering heavy losses this week. Growth stocks had their worst week since the coronavirus crash. The S&P 500 and Nasdaq plunged below their 50-day lines. Today, though, marks the beginning of a new rally attempt. A further follow-through day comprised of a big percentage gain and above-average volume would spark a new “Market in Confirmed Uptrend” signal.
Winning Streak Broken
So, what derailed the market train’s move north, ending a 7- consecutive month of gains? Perhaps too many bricks on the “wall of worry” for the market to continue climbing. As I wrote last week in my bi-monthly ERPE Excerpt, fears of a Lehman-like financial market crisis triggered by China’s Evergrande failure caused part of the recent sell-off. While on a positive note, the U.S. government averted a potential debt default with Congress extending government funding, ongoing Washington politics is weighing heavier on investors. The delayed passing of the Infrastructure Bill and partisan divides over the $3.5 trillion Reconciliation Bill are less-than-positive developments in Congress. The FUD list (things adding to investors’ Fear Anxiety and Doubt) also includes raising concerns over inflation, interest rate hikes, Fed bond-buying tapering, continuing supply-chain disruptions, and, among others, a general sentiment that the market has gone up too much too long.
My indicators are flashing a cautionary yellow light. While TINA (“There is no alternative”) could still be in effect, the stock market’s technical view has weakened.
So, what is the best action now? First, don’t buy the “cash is trash” mantra. Second, remember sometimes the best offense is a good defense — and now is a good time for a defense. Also, remaining diversified, keeping a hedge on, and paying close daily attention to what Mr. Market is saying are essential elements of the plan going into the 4th quarter. Good-bye to Q3 and TGIF!
“As soon as you realize you can afford to wait out any correction, the calamity also becomes an opportunity to pick up bargains.”
~ Perer Lynch
Hope this was helpful.