Hope you are all doing well. Strong performance from technology stocks lifted the NASDAQ to a fractional weekly gain, and the index outperformed the other major U.S. indexes for the sixth week in a row. The S&P 500 ended fractionally lower for the week, while the Dow finished down more than 1%. The U.S. stock market closed out the third quarter with mixed September results for the major indexes. Gains from many of the biggest technology stocks helped the NASDAQ outperform, and the index rose 1.9% in September. The S&P 500 fell 0.5% while the Dow lagged, declining 4.3% and snapping a five-month streak of gains. Jim Carrey got married this week; I have broken down this week’s update using quotes from his iconic Lloyd Christmas character in Dumb and Dumber.
What is the soup du jour? -It’s the soup of the day. -Mm-hmm… That sounds good. I’ll have that.
The Fed will take moderating inflation numbers any day. It is a positive sign that we have absorbed the oil shock. The U.S. Federal Reserve’s preferred gauge for tracking inflation recorded lower-than-expected price pressures in the latest monthly report. The Personal Consumption Expenditures Index (PCE) rose at an annual rate of 3.4% in August. That came in well below consensus expectations for 3.7%. Even excluding volatile energy and food prices, core PCE rose 3.0%. That is down from 3.3% in July and again below consensus expectations.
We usually don’t pick up hitchhikers, but I’m going to go with my instinct on this one. Saddle up, partner.
Don’t read too deeply into the labor market. Like not picking up a hitchhiker that looks suspicious, companies have openings but just don’t have the right people available to fill them. September’s unemployment rate was 4.2%, up from 4.1% in August. The 4.2% unemployment is not indicative of a stalling economy or a lack of jobs. In fact, we have job openings. There are currently around 7.08 million available positions. Compare that to about 7.1 million people looking for work, and we basically have as many jobs as job seekers. The issue is that openings are heavily concentrated in specific fields (like healthcare or skilled trades) that require specialized training or physical presence. Another factor is that with record levels of Baby Boomer retirements, the overall workforce is shrinking. This makes it feel like the job market is tighter than it is, as some companies and government agencies choose not to replace all the people retiring and consolidate roles.
So you’re telling me there’s a chance?
I have been clear that I think we will get a short-term correction in the coming weeks. However, view that as a buying opportunity. There is a chance that correction, if it occurs, sets up another leg of this bull market in 2027 that could potentially rival the late nineties bull market run. Corporate earnings reports will begin releasing in about 2 weeks, and I expect they will once again be great. Couple that with some positive economic news and the recipe is there for a good-to-great stock market in the coming months. This week we learned the U.S. government’s final estimate of second-quarter GDP delivered a positive adjustment due to increases in consumer and government spending. GDP growth was estimated at an annual rate of 2.2% for the quarter versus a 1.5% figure for the previous estimate.
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