Stocks have undergone a swift and substantial decline in value during this traditionally volatile season, influenced by a plethora of emerging concerns. Just a few months ago, the market enjoyed relative tranquility, bolstered by the belief that the Federal Reserve could adeptly manage a soft landing. However, of late, the market’s apprehensions have swelled significantly, with investors closely examining the economic landscape, particularly in light of higher for longer interest rates. In September, the S&P 500 saw a 4.9% loss, and a 3.7% decline in the third quarter. Similarly, the Nasdaq Composite recorded a 5.8% drop in September and a 4.1% decline in the third quarter. The Dow Jones Industrial Average experienced a 3.5% fall in September and a 2.6% dip in the third quarter.
The market experienced an oversold condition, with SPX temporarily finding support at 4238 last week. However, the early gains were wiped out last Friday when SPX closed in the red. This suggests that downward pressure persists, and it’s premature to conclude that the correction has concluded. While the market received robust support from its 200-day simple moving average and nearly one-year uptrend around 4199, investors should monitor this closely. A technical rally could potentially persist, but the speed at which it closes its downward gap will provide insight into whether the index is bottoming out or if it’s merely a rebound resulting from overselling.
September saw stocks at their weakest this year, and the new quarter isn’t looking much better, despite a last-minute government shutdown dodge. The auto industry is in the spotlight with a UAW strike hitting Ford and GM. High oil prices and soaring 10-year Treasury yields have pressured stocks. Experts are divided on how the Fed’s commitment to keeping rates higher for longer will impact the market. Looking ahead, the upcoming months of November and December could bring a seasonal upturn, offering hope for a prosperous 2023.
Sen Zhang
Managing Partner
Corrigit Capital Group