BY SUZANNE HAZLETT, MBA, CIMA®, CFP®
“Autumn carries more gold in its pocket than all the other seasons.” – Jim Bishop
According to the Stock Trader’s Almanac, since 1950, September has been the worst performing month of the year for the Dow Jones Industrial Average, the S&P 500 Stock Index, and Russell 1000, and the worst for the Nasdaq Composite since 1971, and the small-cap Russell 2000 since 1979.
September seasonal weakness and October phobia loom large, but there may be too much negativity. Expect some volatility and sideways action over the next 60 days or so, with a likely test of the market’s 2024 lows.
Market fundamentals, including valuation, drive near-term returns and are essential to identifying opportunities. Markets that are inexpensive, or even cheap, tend to produce higher returns in the future. And while expensive markets may remain expensive for a long time, inexpensive markets typically don’t stay that way. Put more simply, heed Warren Buffet’s advice: “Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.”
A tactical asset allocation may be worth considering for investors who choose to be more active in their portfolios based on a shorter-term outlook.
U.S. Large Cap – Much of the good news is already reflected in valuations, and earnings growth will be needed to carry the market higher.
U.S. Small Cap – The Fed’s expected easing cycle could prove a catalyst for small-cap stocks. Small caps have historically outperformed large caps after the Fed’s first interest rate cut.
Non-U.S. Equities – Economic activity in developed market economies shows signs of improving, and earnings growth should continue to improve with a European Central Bank rate-cutting cycle on the near horizon.
Fixed Income – Longer duration munis remain attractive for investors in the highest income brackets.
Cash – Investors have been compensated with cash equivalent yields above 5%. Opportunities may arise to redeploy excess idle cash into the markets this fall.
Suzanne Hazlett, MBA, CIMA®, CFP®, is a Certified Investment Management Analyst® and CERTIFIED FINANCIAL PLANNERTM professional. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Securities are offered through Raymond James Financial Services, Inc., member FINRA/SIPC. All investments bear risk of principal loss. Past results are no guarantee of future performance. HAZLETT WEALTH MANAGEMENT, LLC is independent of Raymond James and is not a registered broker/dealer. 675 Sun Valley Road, Suite J1 + J2, Ketchum, Idaho, 83340 208.726.0605 HazlettWealthManagement.com