Market View: August-September, 2024

By Argent Wealth Management, LLC on August 1, 2024

Conclusion

• Stock market signaling bull market to continue.
• Inflation is on a downward trajectory.
• Fed to make first rate cut in September.
• Economic indicators are on an upward trajectory.
• The fall tends to be a weak seasonal time of year, so a correction would not be surprising.

Stock Market Indicators 1

• 73.4% of stocks in the NDR Multi-Cap index are above their 200-day moving averages.
• The market tends to go up 11.5% per annum when this is the case.

Stock Market Indicators 2

• Demand volume is higher than supply volume.
• The S&P 500 goes up 11.92% per annum when this is the case.

Stock Market Indicators 3

• Earnings estimates continue to increase.
• Revisions higher have increased over the last 60 days relative to the last 280 days.
• Since 2009, stocks have outperformed bonds by 7.31% per annum when this is the case.

Stock Market Indicators 4

• Breadth has increased.  Small-cap stocks have outperformed large-cap stocks this quarter.

Inflation

• Inflation is on a downward trajectory.

Fed Expectations

• With inflation coming down, investors now put a 100% chance the Federal Reserve (The Fed) will cut the Federal Funds Rate (FFR) to 5.00-5.25% or below in September.
• One month ago (green bar), investors only put a 60% chance the Fed would cut the FFR in September.

Economy 1: Credit Conditions

• Despite higher interest rates, the availability of credit to consumers and businesses is favorable.
• Credit is available to expand your business or buy a home.
• This measure would likely be on a downward trajectory if a recession was imminent.

Economy 2:  Unemployment

• There remains 1.2x the number of job openings per unemployed in the United States. 
• Companies are looking to retain and hire new employees as they invest and grow.

Economy 3: Consumer Health

• The Household Debt Service Ratio is below the historical average. 
• Consumers are in good shape and consumption makes up about 70% of GDP in the U.S.

Seasonality

• The fall tends to be a weak seasonal time of year. 

Stock Market Sentiment

• And sentiment remains more optimistic than pessimistic.
• A correction in the fall  would likely be a buying opportunity into a year-end rally.

Presidential Sentiment

• Many are concerned about the election.
• Unless the mood about the president is extremely pessimistic, which often coincides with external economic shocks (see extreme pessimism during 2008 financial crisis), pessimism about the president isn’t bad for the stock market.

History of Bull Markets

• What do typical bull markets look like?
• The mean for all bull markets is an 85.9% gain over 576 market days. 
• The Dow Jones is up about 40% over the last ~450 market days.
• Historically, long-term bull markets, which is what it looks like we are in today, returned about 105% on average over 751 days.

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