September into October could be bumpy for stocks

We enter September with the three major averages close to or above yearly highs. Momentum is still on the side of the bulls. As such, in the next week or so, markets could attempt to scale those heights and possibly better them.

It is what happens next that concerns me. The next two months are seasonally the worst period for the stock market. However, investors also expect the Federal Reserve Bank to cut interest rates at their meeting on September 17-18. That is normally a bullish development for stocks. We won’t know if the Fed will cut rates, but the markets are betting heavily on that outcome.

The macroeconomic data this week certainly reinforced those expectations. Second quarter GDP was revised upward on the back of higher consumer spending from 2.8% to 3%. This week’s jobless claims were flat versus last week and the Fed’s favorite inflation gauge, the Personal Consumption Expenditures Price Index (PCE), came in line for July with economists’ expectations at 0.2%.

Between now and the FOMC meeting, the only data point that could make a difference to the Feds’ rate decision would be next Friday’s non-farm payroll numbers for August. Recall that the last report spooked investors. The number of jobs decreased by 36.3% versus the month before. Economists were looking for 175,000 job gains but the economy only added 114,000 jobs.

The data sparked fears of a deep recession and calls for immediate rate cuts by the Fed to avert a hard landing. Since then, investors have explained away the sharp increase by blaming the shortfall on Hurricane Beryl, which decimated the Houston job market. If next week’s jobs report does not show another sharp decline, the Fed is expected to cut the Fed Funds rate by 25 basis points.

What concerns me is that several market strategists are expecting an even deeper rate cut by one-half percent, followed by cuts every month for the remainder of the year. In my opinion, they are way over their skies unless the jobs data next week is poor.

In any event, one of the major concerns of investors this week was the fear that a disappointing quarterly earnings result from Nvidia might sink the markets. While the AI leader posted better earnings and sales, it wasn’t enough to satisfy investors. As a result, the company’s stock fell roughly 6% after its earnings announcement, but the markets overall held their own.

There has been a lot of backing and filling in the markets over the last several days. Blame it on the summer doldrums. It feels like the market wants to grind higher, possibly into the FOMC meeting in two weeks. An added variable investors will contend with is politics.

After Labor Day, voters normally begin to pay attention to the upcoming elections. It is a time when political promises come fast and furious as politicians and the media make hay while the sun shines. The combination of negative seasonality and election rhetoric could be ‘a perfect storm’ of volatility for the stock market, especially given the level of gains in the market. Many who follow technical charts are convinced that a pullback will occur. It is just a question of when. I agree.

Bill Schmick is a founding partner of Onota Partners Inc. in the Berkshires. None of his commentary is or should be considered investment advice. Email him at bill@-schmicksretiredinvestor.com.

Latest News

The Hydrilla Menace: Scientific coalition aids Salisbury’s lakes amid immediate and dire threat

Bill Moorhead, senior botanist with CT DEEP’s Natural Diversity Database, took notes during a boat tour of East Twin Lake Monday, Sept. 9 where new colonies of hydrilla had taken root. The Connecticut River variant’s genetic makeup is still a mystery to scientists.

Photo by Debra A. Aleksinas

This is the third of a series on invasive aquatic hydrilla and its growing threat to waterbodies and communities in Northwest Connecticut.

SALISBURY — Three pontoon boats loaded with passengers headed out into the open waters of East Twin Lake. This was no joy ride.

Keep ReadingShow less
Norfolk installs 13-acre solar array at Town Farm

This crew worked long hard hours all summer long installing the landfill solar array in Norfolk.

Photo by Jennifer Almquist

NORFOLK — Driving into the Norfolk Transfer Station, their vehicles filled with a week’s worth of garbage and recycling, folks in Norfolk have watched the extraordinary transformation of the surrounding fields into a massive solar array.

Norfolk is one of the first towns in the state to install a 5-megawatt (MW) landfill solar array covering more than 13 acres.

Keep ReadingShow less
Crescendo’s upcoming tribute to Wanda Landowska

Kenneth Weiss (above) will play a solo recital performance in honor of Wanda Landowska, a harpischord virtuoso, who lived in Lakeville for many years.

Provided

On Sept. 14, Crescendo, the award-winning music program based in Lakeville, will present a harpsichord solo recital by Kenneth Weiss in honor of world-renowned harpsichordist Wanda Landowska. Landowska lived in Lakeville from 1941 to 1959. Weiss is a professor at the Paris Conservatoire and has taught at Julliard. Born in New York, he now resides in Europe.

Weiss will play selections from “A Treasury of Harpsichord Music.” It includes works by Baroque composers such as Bach, Mozart, and Handel. It was recorded by Landowska at her Lakeville home, at 63 Millerton Road, which overlooks Lakeville Lake. Weiss said, “I am honored and excited to play in Lakeville, where Wanda Landowska lived.”

Keep ReadingShow less
Silent cinema, live magic

The live audience at Music Mountain takes in a silent film Sept. 7.

Natalia Zukerman

On Saturday, Sept. 7, Gordon Hall at Music Mountain was transformed into a time machine, transporting the audience for a 1920’s spectacular of silent films and live music. Featuring internationally acclaimed silent film musicians Donald Sosin and Joanna Seaton, the evening began with a singalong of songs by Gershwin, Irving Berlin and more. Lyrics for favorites like “Ain’t We Got Fun,” “Yes Sir That’s My Baby,” and “Ain’t Misbehavin’” were projected on the screen and Sosin and Seaton lead the crowd with an easeful joy. The couple then retreated to the side of the stage where they provided the live and improvised score for Buster Keaton’s 1922 short, “Cops,” and his 1924 comedy, “Sherlock Jr.”

Joanna Seaton and Donald Sosin, a husband-and-wife duo, have crafted a singular career, captivating audiences at some of the world’s most prestigious film festivals—New York, TriBeCa, San Francisco, Seattle, Denver, Telluride, and Yorkshire among them. Their performances have graced venerable institutions like MoMA, Film at Lincoln Center, the AFI Silver Theatre, and Moscow’s celebrated Lumière Gallery. Their melodic journey has taken them to far-flung locales such as the Thailand Silent Film Festival and the Jecheon International Music and Film Festival in South Korea. Notably, Seaton and Sosin have become a fixture at Italy’s renowned silent film festivals in Bologna and Pordenone, where they perform annually.

Keep ReadingShow less