What to Expect in The Stock Market (September 20-24)
… Never take off your Bulletproof Vest
Somehow I messed up sending this yesterday. Sorry y’all. I will of better next time.
As always we begin the week with me reflecting on what Manchester United (notice I used the full name and not “Man U”, almost like my mom when she is upset with me and she uses my full name. NOT GOOD). I just cannot begin to not comprehend what I witnessed on Tuesday, when Manchester United decided to gift the Champions League opening match to Young Boys. To which you will probably ask, “Young Boys? Who is Young Boys?”
EXACTLY!!!
Literally, they wrapped the game in a nice little bow like an early Christmas present and presented it to Young Boys on a silver platter. It was DISGUSTING to watch. First of all, no it was not just Linguard’s fault (although he has a lot of blame to take) but it was the entire team. They should have never been in that position to begin with. The match started very well with Ronaldo doing the things Ronaldo does and scoring in the first 13 minutes of the game. However after that, it was all DOWN HILL. Manchester United could not control the game at all and then Wan Bissaka got a red and Ole Gunnar Solskjær panicked and the went full defensive mode bringing on Varane and playing five in the back. Basically gifting the rest of the game to the YB, it was so ridiculous.
And then, we followed Tuesday with a good outing against West Ham but we almost got robbed by VAR. All I know is we better win some SILVERWARE this year!
Now for the reason, you opened this post.
STOCK MARKET UPDATE
So it is September or should I say SPOOKTEMBER!!
Am I right?
Am I right?
No….
Well I will see myself out 🚪🚶🏾♂️
But seriously, September is really living up to its name as the worst month for stocks. Stock declined for the second week in a row as weekly jobless claims rose and consumer sentiment declined. However; Retail sales numbers were higher than economist expected. Actually economist expected a decline in retail sales for August but it rose. (What else is new? Economist will forever be wrong during this pandemic).
Crazy Stat of the WEEK: 55
As in 55% of stocks within the S&P 500 (which comprises of 505 companies meaning 278 companies within the index) is down at least 10% from their All Time highs (Stock Market term for this is a Correction. “Fancy way of saying you lost a ton of money very quickly.” Peter Lynch quote ).
However; the S&P 500 has not see a decline of more than 5% all year. As a matter of fact, the most consecutive days the S&P 500 has been red is 5 days and it has averaged about 2% loss before taking back off and hitting more new highs.
Now a lot of people will see that and their reaction might be well that just shows how heavily the market is over-weighted to the top 10 companies in the index which make about 28% of the Index. Although true, this does not tell the whole story. It is actually not that uncommon for most stocks to be down in the index while the index itself keeps hitting new highs. Per Axios' Sam Ro
Brian Belski, BMO Capital Markets chief investment strategist, analyzed the S&P 500 since 1990 and found that it’s far from unusual to see most stocks in the market down significantly even as the index makes new highs.
On average, 55% of the S&P was down more than 10% from all-time highs at the points when the index closed at new highs.
During the period, the median stock was down an average of 12.1% from its all-time high when the S&P closed at a new high.
KEY TAKEAWAY: Diversification is your Bulletproof vest.
The Stock Market is always going to be volatile and have winners and losers. As Peter Lynch says "Diversification is your only free lunch in investing" (Two Lynch quotes in one newsletter? OMG its almost like he is my favorite investor or something). It ensures that when things get horrible in the markets, it may hurt a lot but you won't be wiped out.
ECONOMIC UPDATE
Inflation might actually be…. Dare I say… “TRANSITORY”. Jerome Powell’s reaction
Consumer Price Index Numbers for August were released on Tuesday and it had an uptick of only 0.1% which is less than the 0.3% we saw in July. However; it was still 5.3% year over year increase. But last year the economy was basically shut down and prices were in the gutter.
Main driver for the high rate of inflation had been used car prices; which has finally started falling back to Earth. Travel ticket prices are also finally coming back to Earth as people are no longer paying anything and EVERYTHING just to get out of their house. However; prices for some consumer items remain stubbornly high because the supply chain is still very much disrupted. Especially when we look at chips which are now needed for basically EVERYTHING!
WHAT TO WATCH FOR THIS WEEK
Biggest event this week is the Federal Reserve’s two-day policy meeting that starts on Tuesday and ends with Papa Powell’s press conference on Wednesday. Everyone will be listening with bated breaths, to hear if the Fed will finally law out its plans for tapering. We saw the ECB announce tapering and say it was not tapering, will the Fed do something similar? Or will the Fed us the recent inflation numbers to remain on the sidelines and allow things continue as they have been? My bet is the Fed do nothing until next year because inflation seems to be under control.
I hope you all have A WONDERFUL week. I will have another post on Wednesday. You can also catch me on TikTok, Instagram, and YouTube everyday.
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Remember GENEROSITY > greed
God bless Each and Everyone of y’all
✌🏾
-Kelechi