Markets on edge.
Traditionally, September is a choppy month for stocks and this September was no exception. Despite the S&P 500 squeaking out a positive third quarter (+.23%), the -4.76% tumble for the large-cap index left investors on edge this month. Rising bond yields weighed on highly valued growth and tech stocks. Adding to the list of investor worries are concerns about the government debt ceiling, hawkish signals from the Federal Reserve, and supply chain disruptions.
The growth trade came under pressure, detracting -5.54% this month, while Value and Small Cap stocks managed the volatility better giving up -3.54% and -2.56% respectively. It’s this rotation that’s become yet another headwind for the S&P 500 given the index’s heavy tilt toward growth stocks. Globally, Foreign Developed stocks fell -3.19% and Emerging Markets dropped -4.25%.
Fed talk.
In this month’s meeting, the Fed indicated a willingness to respond to growing inflationary pressures by lifting rates as soon as next year, as well as tapering bond buying as soon as November. This was enough to send bond yields higher, with the 10-year Treasury climbing 20 basis points over the last week of September alone before settling in for the month at 1.52%.
The new fiscal cliff.
On the edge of a shutdown, Congress passed a short-term funding bill in the 11th hour to keep the lights on until Dec 3rd. It has been sent to President Biden to sign. Lawmakers in Washington will still need to act on the debt ceiling before October 18th in order to prevent a possible default on U.S. debt.
Supply chain bottleneck.
We have all felt the effects of the prolonged pandemic-era supply chain problem. Whether it’s the chip shortage, lumber/building material prices, or the 36% increase in natural gas this month, consumer demand is continuing to rise and production/manufacturing delays are only getting worse, magnifying the supply and demand imbalance. This certainly puts the economy on edge heading into the holiday season and 2022.
