Talk about misleading. The month of August used to be one of boredom, low volatility and vacations. Heat, humidity, sunburn and no action in equities. Obviously, that is no longer true. Markets have been moving, just not where you want them to and these scrums are fascinating on a micro level.
Why did tech decide to sell off and why did it decide to rally? Why is energy a non participant? Why isn’t the housing market taking it on the chin with higher mortgage rates? One question leads to 20 more and at the end of the day, you still don’t have a clue.
Thats what make trading and investing so much fun. You think you know something until you don’t or you don’t know crap and you hit it right on the head. It’s been like that for over a 100 years and I am sure it will continue to be like that until we are long gone. No one knows more than anyone else and if they tell you they do, they are full of it. I certainly don’t. I may have some experience to draw on and I have used my gut more than I have used the internet at times but like everyone else, I get things wrong.
I would not have expected to see an August like this one. Not a tremendous amount of volatility but it was there. We may not participate in all that much in August because after all, it is August, but we still keep one eye on things and I am going to use my good eye for this little column.
After Chairman Powell’s speech last week at Jackson Hole, most investors feel that the game is still on. Rates will continue to rise, albeit at a much slower pace, but they still will. The odds for a rate hike in September is around 50/50. I put it at less. 25/75. Only because I do think the continued raising of the Fed benchmark will have a much more serious effect on the economy than the previous ones. It will start becoming dangerous when it doesn’t need to be.
Will there be another rise this year you ask? I say yes, but they shouldn’t. Doing something for the sake of doing it is not a positive strategy. Granted these guys are a hell of lot smarter than I am but I just do not see any need for any more rate hikes. Not now, not in 2024. You did your job and it’s done. Move on. Fight some other battle.
Which brings me to something everyone should be aware of. September is generally not a pretty month investing wise. Yes, it is the beginning of college football. Pro Football starts. The end of the baseball season. New TV shows on National networks(Huh?) I love September but as an investor it has been precarious at best. I think statistically it ranks as the worst month overall and while everyone thinks of October as the one, it is September. Cooler temperatures, cooler prices.
Wait, there is no such thing as cooler temperatures anymore. Climate change is burning up the planet. It is. I mean it.
Not really sure why the Eastern half of the country has cooled down soo much. The average temperature in NY this summer was roughly 3.2 degrees below normal. Washington was 1.9 degrees below normal. The South and Midwest may have baked but the East Coast was warm, sunny for the most part and actually pretty damn nice. Take that NYTimes!
Does this mean that we will have a colder than normal winter? Who knows. The climate on planet Earth has been changing since we were a molten piece of gas and rock 5 billion years ago and the climate on Planet Earth will continue to change. We just have to deal with it and stop creating a narrative that won’t end.
I digress.
Just be prepared for some mini shocks to the market. Will this weeks JOBS report be the first shot across the bow? Probably not. One thing I will say that when you look at the estimates for different data points, economist are pretty close to spot on. There have been some rare misses but for the most part, they get it right so my expectation for Friday is pretty much what has been reported. My one good eye will be sharply focused on wage growth however. That is the data point that tells way more than anything else at this point. It has been higher than the inflation level for several months and that will need to cool off a bit if we are truly going to get past this “Transitory” inflation.
Good column, and I agree with the "Good Eye".