September is typically the worst month of the year for stocks, but this time it’s exceptional as the S&P 500, Dow, and Nasdaq ended the third quarter in positive territory, erasing earlier losses caused by Federal Reserve Chair Jerome Powell’s commentary. Powell had indicated expectations of two rate cuts of a quarter percentage point each by year-end, contingent on the economy moving as anticipated. The S&P 500 (SPX) finally broke through its resistance at 5669, where it had been consolidating for two months, on September 18. This breakout transformed the previous resistance into a new support level, which could serve as a potential buffer during pullbacks in October—a month historically marked by volatility. This support level was tested during the market’s pullback in the first week of October, triggered by a strong September jobs report. The U.S. economy added 254,000 jobs, and the unemployment rate fell to 4.1%, surpassing expectations. So far, the uptrend appears to be intact.
Momentum has shifted quickly between market leaders and laggards. For example, #NVDA (NVIDIA) had been a market darling for years before peaking in June. Bulls made three strong attempts to reclaim the uptrend, including the most recent one on September 26, but all failed. While the uptrend remains intact, the $127 level will be crucial to watch moving forward.
On the other hand, #TSLA (Tesla), a laggard within the “Magnificent 7” group, has struggled for several years but gained significant momentum after breaking out of a nearly three-year downtrend, following two attempts in July. However, a wide resistance zone between $271 and $314 remains intact. Breaking through this level may prove challenging without a major catalyst. The unveiling of Tesla’s Robotaxi on October 10 could provide the push needed to break out. It will be interesting to see if this event sparks a rally.
In September, despite seasonal headwinds, our long-term investment portfolio gained 5.06%, bringing cumulative gains since May 2020 to 164.68%. Our dynamic investment portfolio gained 4.22%, delivering an overall return of 83.76% since May 2020. (For detailed insights, please refer to our latest performance report.) One structured note tracking SPX futures closed just after September (which will reflect in Q4 performance), yielding a 17% gain in one year before being called back by the issuer. Overall, our structured note portfolio has averaged a 13.86% return on all closed notes as of September, underscoring the importance of protections—especially during market all-time highs (ATH).
The U.S. 3-month Treasury yield and 10-year Treasury yield remain inverted by 85 basis points. Historically, the countdown to a recession typically begins only after this inversion reverses. In 2020, the recession started five months after the un-inversion, and in 2007, it began seven months after. Could this time be different, with the un-inversion signaling a recession that’s further out than expected?
Although investors are generally optimistic as the year approaches its end, October’s reputation for market turbulence persists. It’s a month known for historical volatility, with several major downturns having occurred during this period. While the Dockworkers have suspended their strike as of this writing, technology and automation trends remain relentless. Who knows what will happen next? Don’t blame AI! And with Trump back in the election mix, it’s like adding a surprise trapdoor to an already haunted house, making everything even more unpredictable. Buckle up!