9-24-24: We Enter Autumn – The Market’s Best Season

by Gary Alexander

September 24, 2024

Over the weekend, we bid a fond farewell to a forgettable summer. The solstice occurred silently early on Sunday morning in North America. As if anyone needs a reminder, summer was a wild roller-coaster ride that basically went nowhere but ended at record highs in the S&P 500 and Dow Jones Industrials at the tail end of the season, on September 19th, but not before giving most traders a severe case of indigestion.

In mid-July most market indexes set new highs. NASDAQ’s July 11th high still stands, as does the Russell 2000’s July 31st peak, but the first week of August was a nightmare for traders. On Monday, August 5th, stocks gapped sharply lower and reached 15% correction territory in NASDAQ while nearing a 10% correction in less than three weeks in the benchmark S&P 500, but then we saw a recovery so quick that the index was within a whisker of new highs by the end of August, only to stage an instant replay of a first week downdraft after Labor Day, September 3-6. Once again, the market then recovered to set new highs.

If there’s one reason for all these gyrations, it has to be the Federal Reserve’s procrastination on rate cuts at their July 31st meeting and then their doubling-up on rate cuts (0.50% rather than 0.25%) on September 18th. Notice the 13.3% drop in the Russell 2000 in just three trading days – from Wednesday, July 31st, the day the Fed fired blanks, to the following Monday. Then, notice the new highs on September 19th (in two indexes), the day after the Fed doubled down on their first rate cut, pushing the S&P and Dow to new all-time highs. The Fed can therefore lay claim to slaughtering stocks in early August and reviving them in mid-September. Of course, there were no political ramifications for these moves. Perish the thought!

For fans of growth stocks – one theme for these columns – you will be pleased to notice that the S&P 500 Growth ETF (IVW) is up 26.5%, almost double the S&P 500 Value ETF (IVE), up 13.9% year-to-date.

According to Friday’s Bespoke Investment Group’s “Bespoke Report,” here are the best sectors in 2024:

We have long covered the fact that stocks often soar in the fourth quarter, so I won’t belabor that here.  I’ll just list the basic data from the latest Bespoke Seasonality table: using the S&P 500 from 1945 through August, 2024, the final quarter delivers about as much (+4.24%) as the first three quarters (+4.44%).

There’s one sadder milestone to report – the federal government’s Fiscal Year 2024 ends next Monday:

Another $2 Trillion in Red Ink is Set to Spill –

Does Any Candidate Care? (Do Voters Care?)

The 2024 federal Fiscal Year ends next Monday, September 30, just six days away. Both Presidential candidates seem to be like divorced parents of estranged children, trying to lure the kids to their home with the most candy and other goodies, with no chores or downside – no payments for those promises.

While some progressive politicians still harangue us over sea levels rising an inch or so per decade, these same politicians keep ignoring a rapidly rising ocean of red ink – over $3 trillion in FY-2020 and nearly $3 trillion in 2021, followed by a welcome a dip to $1.38 trillion FY-2022, followed by two straight years of rising deficits in FY-2023 and FY-2024. We won’t know the final 2024 figure until mid-October, but last week I reported that the August deficit was a ginormous $383 billion, so a $2 trillion total is likely.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

That’s over $20 trillion of our $35.4 trillion total national debt coming in the last 16 fiscal years, and nearly $11 trillion in in the last five years. How well I remember the month we crossed $1 trillion in total debt in 1982, and I thought the world would come to an end then. That event was so traumatic it caused President Reagan to appoint J. Peter Grace to start a task force to cut government waste, fraud and abuse.

It’s always tempting to raise taxes to close the deficit, and within that solution the favorite populist answer is to “soak the rich,” but it’s a sad truth that there aren’t enough billionaires to finance a single budget of $7 trillion – and you can only soak the rich once before the geese quit laying golden eggs.

The key to funding the deficit is the same way we could stop running up bloated college debt, credit card debt or stratospheric car or home loans, or other personal debts – don’t spend beyond your means. But in the era of Modern Monetary Theory, that’s as old fashioned as rotary phones or… voting on election day.