facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause

Strategy & Market Notes

Market Note -September 2021

Global stock markets have dripped slowly downward over the past couple weeks. Today, that slow drip seems to have become more of a leak as the major global stock indices sold off more in a single day, or at least since July. 

Leading up to recent weeks and days, the stocks that comprise the S&P 500 index had reached a point where more than 75% had traded at prices above their 200-day average for 210 days, the 4th longest streak ever in history. That streak has now ended. Questions now include, why did the streak end? And what typically happens next?  

There are a few culprits causing market nerves. The month of September is historically volatile and often negative for the stock market. The waring political parties are at it again as well. The weapon du jour is the limit on the amount of debt the U.S. government may issue (the debt ceiling). If Congress does not act to raise the debt ceiling by October 1st the United States will not be able to pay its bills, meaning defaults on U.S. Treasury debt. Stock market turmoil has also been stirred by the Chinese Communist Party’s crackdown on publicly traded Chinese companies and rising tensions between China and the U.S. Remember, many U.S. based multinational companies derive a healthy chunk of their sales from the Chinese market for goods and services. Any limitations to market access would cause a recalibration of stock values for these companies. Last, but not least, the rise of the Delta variant has caused a slowdown in business activity, similar to the prior spike in COVID cases. 

What usually happens after a streak in the number of trading days the S&P 500 closes above its 200-day moving average? Good things, if history is a guide. From 1933 to September 10, 2021, there were only 2 instances of S&P 500 losses during the next 3 to 6 months after the streak ended. You can observe this in the chart below of the S&P 500 with the 200-day simple moving average of the index overlaid in blue. The chart shows data going back 10 years and you can identify those times when similar streaks were broken and then subsequent positive index performance.

For now, we view recent volatility as a historically normal pattern (anyone remember the debt ceiling debate that roiled markets temporarily in 2011?) that will pass. However, we remain vigilant to any new information that becomes available. 

As always, don’t hesitate to connect with your Integra Capital financial advisor if you have questions or concerns. 


DISCLOSURES:

The information contained herein has been obtained from sources believed to be reliable, but the accuracy of the information cannot be guaranteed, nor should it be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change. Information presented does not involve the rendering of personalized investment advice but is limited to the dissemination of thoughts and opinions on investment topics.  Information presented is not an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned herein.

Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client's investment portfolio. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance, strategy, and results of your portfolio. The use of charts, formulas or models does not guarantee a particular success rate or prevent potential losses.

The performance of various indexes referred to in this newsletter do not reflect the performance of Integra Capital clients. Historical performance results for investment indexes and/or categories generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. This publication is provided for informational purposes only and should not be construed as tax or legal advice.  Always consult an attorney or tax professional regarding your specific legal or tax situation.