How to invest if the Fed holds rates steady
Will there be another Fed rate hike? A look at that and other factors affecting the stock market this month.
Will there be another Fed rate hike? A look at that and other factors affecting the stock market this month.
Will there be another Fed rate hike? A look at that and other factors affecting the stock market this month.
Anna-Louise Jackson is a financial journalist with more than a decade of experience reporting on investments, retirement and other areas of personal finance. Her writing has appeared in Bloomberg Businessweek, Bloomberg 온라인 바카라 게임, CNBC, MarketWatch, Forbes Advisor, and Buy Side from WSJ, among many other publications. She was previously the lead investing writer for NerdWallet.
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The U.S. stock market fell in August, marking only the second month of declines as this year바카라 게임 웹사이트s rally briefly lost some of its gusto. Stock prices took a big hit after Fitch, a ratings agency, downgraded the credit rating on U.S. debt, though the market bounced back amid more optimism that the Federal Reserve will pause on .
The major benchmarks for the U.S. stock market all experienced a turnaround in August, though not enough to eke out gains. The Dow Jones Industrial Average led declines, falling 2.4%, while the Nasdaq Composite Index lost 2.2%, and the S&P 500 was down 1.8%.
Perhaps counterintuitively, that late-month rally in the stock market was spurred by signs of cooling in the U.S. economy. Although Fed Chair Jerome Powell warned in late August that further interest rate hikes could be necessary to fight , market participants appear to be far less convinced. Traders now expect, with a greater-than 60% probability, that central bankers won바카라 게임 웹사이트t raise rates again at any of the Fed바카라 게임 웹사이트s final three meetings this year.
One of those meetings occurs this month, and while the central bank continues to dominate the market narrative, September could mark a 바카라 게임 웹사이트big pivot바카라 게임 웹사이트 if traders continue to brush off the Fed바카라 게임 웹사이트s messaging about interest-rate policy, says Greg Bassuk, chief executive officer of AXS Investments. That doesn바카라 게임 웹사이트t mean the Fed obsession immediately abates, but rather that traders will be more confident 바카라 게임 웹사이트we바카라 게임 웹사이트re at the tail-end of the rate-hike cycle.바카라 게임 웹사이트
Leading up to the Fed바카라 게임 웹사이트s meeting, scheduled for Sept. 19 and 20, market participants will be especially keyed in on economic reports related to employment and inflation for signs that a rate-hike pause is in order this month. More broadly, the stock market faces a test of whether it can recoup August바카라 게임 웹사이트s losses.
Here바카라 게임 웹사이트s what to watch in the month ahead, and in September and beyond.
Stock market outlook for September 2023
Do economic reports suggest a Fed rate hike pause is in order?
The Federal Reserve has dominated the market바카라 게임 웹사이트s attention since mid-2022, when central bankers embarked on their aggressive rate-hiking strategy to combat decades-high inflation. 바카라 게임 웹사이트The Fed seems to be controlling absolutely everything,바카라 게임 웹사이트 says Sandy Villere, partner and portfolio manager at Villere & Co.
During his remarks at an annual economic symposium in Jackson Hole, WY, Powell reiterated that policymakers remain focused on getting inflation back to a goal of 2%. The Fed바카라 게임 웹사이트s preferred measure of inflation, the personal consumption expenditures (PCE) price index, rose at an annual rate of 3.3% in July. Figures for August won바카라 게임 웹사이트t be released until Sept. 29, though another inflation gauge 바카라 게임 웹사이트 the consumer price index (CPI) 바카라 게임 웹사이트 will be released on Sept. 13.
Ahead of the Fed바카라 게임 웹사이트s mid-month meeting, expect that CPI report to be closely-watched, Villere says. 바카라 게임 웹사이트Inflation data is going to be quite important since it바카라 게임 웹사이트s such a data-driven decision.바카라 게임 웹사이트
Still, barring a report that shows 바카라 게임 웹사이트extremely바카라 게임 웹사이트 high inflation, a new tone may be struck in the market starting in September, Bassuk adds. As investors become more confident that a soft landing is possible, and , they바카라 게임 웹사이트ll also look for confirmation in reports that track consumer spending and the housing sector, he says.
What바카라 게임 웹사이트s more, the employment report for August showed that hiring remains steady, though the unemployment rate rose to 3.8%, the highest level since early 2022. That report further emboldens those people in the market who hope the Fed will hold rates steady, and some slowing in the economy is deemed good news for stock prices.
Making sense of dynamics within the market
Given that seemingly not-great news about the economy is deemed good news for stock prices, the stock market itself bears watching. Coming off the worst month of the year so far, stocks now enter what바카라 게임 웹사이트s historically been a weak period. The S&P 500 has seen average declines of 1.1% in the 90-plus Septembers dating back to 1928, making this the worst month of the year.
Be it in September or not, some investors will be keen to see whether the S&P 500 can top its year-to-date high, set in late July, as this may indicate there바카라 게임 웹사이트s more room for stock prices to rally But investors should brace for as there will likely be 바카라 게임 웹사이트more bumps바카라 게임 웹사이트 in the road through the end of the year, Bassuk advises.
The source of such volatility for the U.S. stock market could come from afar, as geopolitical developments have been a bit ignored this year, Bassuk notes. The economic slowdown in China and the ongoing Russia-Ukraine conflict have the potential to 바카라 게임 웹사이트shake바카라 게임 웹사이트 markets, he adds.
Another dynamic worth watching is whether investors continue to favor growth stocks in lieu of value stocks through the end of 2023, Villere notes. Growth stocks, or shares of companies that tend to grow faster than the broader market, have 바카라 게임 웹사이트come roaring back this year,바카라 게임 웹사이트 and one gauge is up more than 36% this year, he notes. By comparison, a gauge for value stocks 바카라 게임 웹사이트 or shares of companies that may be inexpensive relative to their intrinsic worth 바카라 게임 웹사이트 has risen less than 4%.
How to invest in September and beyond
The strong year-to-date returns for growth stocks like those in the technology sector might present a selling opportunity, especially for investors who want to buy stocks that have been 바카라 게임 웹사이트left for dead바카라 게임 웹사이트 in this year바카라 게임 웹사이트s rally, Villere notes. People may find some 바카라 게임 웹사이트really, really cheap바카라 게임 웹사이트 stocks, particularly in sectors that have fallen out of favor more broadly 바카라 게임 웹사이트 including financial services, consumer discretionary, and materials, he adds.
Another out-of-favor investment that Bassuk favors is , and that바카라 게임 웹사이트s because investments in this sector 바카라 게임 웹사이트 including real estate investment trusts (REITs) 바카라 게임 웹사이트 offer a combination of an income and growth opportunity. And commercial real estate is more attractive than residential because it has been 바카라 게임 웹사이트disproportionately hit hardest,바카라 게임 웹사이트 he adds.
Similarly, focusing on diversification 바카라 게임 웹사이트 and even beyond stocks 바카라 게임 웹사이트 may help investors to better weather market volatility, and that바카라 게임 웹사이트s why Bassuk recommends that investors consider adding exposure in their portfolio to and alternative investments. Because these assets aren바카라 게임 웹사이트t so correlated to the performance of the broader stock and bond markets, 바카라 게임 웹사이트they allow you to stay invested바카라 게임 웹사이트 while mitigating some potential volatility in your portfolio, he adds.
Even if there is volatility, investors who feel cautious have more alternatives for earning solid returns, which is an about-face from last year바카라 게임 웹사이트s so-called TINA dynamic, or there is no alternative. Some of Villere바카라 게임 웹사이트s clients ask why they should invest in higher-risk assets when they can earn a 5%-plus on cash in their or 바카라 게임 웹사이트 and that logic is very rational, he says.
바카라 게임 웹사이트Now there are reasonable alternatives to stocks,바카라 게임 웹사이트 he says, adding that it may make sense for investors to keep up 10% to 15% of their assets in cash accounts.
Editorial Disclosure: All articles are prepared by editorial staff and contributors. Opinions expressed therein are solely those of the editorial team and have not been reviewed or approved by any advertiser. The information, including rates and fees, presented in this article is accurate as of the date of the publish. Check the lender바카라 게임 웹사이트s website for the most current information.
This article was originally published on and reviewed by Lauren Williamson, who serves as Financial and Home Services Editor for the Hearst E-Commerce team. Email her at lauren.williamson@hearst.com.
