September 2024 Mid-Month Review
Another volatile start to the month as the S&P 500 falls 4% in the first week. Despite the fear mongering on the financial news, it’s important to remember that it also fell 5% during the first week in August. September is a historically weak seasonal period so the sectors that have been strongest over the last few months softening up a bit to kick it off is nothing out of the ordinary. Zooming out a bit here can tell us a more nuanced story of what’s going on.
During the month of August, there were new monthly closing highs in Staples, Financials, Materials, Industrials, as well as Healthcare. This isn’t something that typically signals underlying weakness. Although a few of these sectors may be touted as defensive, it is not considered a sign of deterioration when they are outperforming at the same time as more historically growth sectors.
The relationship between the Technology sector and the S&P 500 (XLK/SPY) finally reached the former highs from just before the tech bubble in 2000. There is a massive amount of price memory and overhead supply here, it makes sense that there is some weakness as market participants take profits from an incredibly strong run. At the same time, the relationship between semiconductors and the S&P 500 (SMH/SPY) has already broken out from those former highs. Whether that former price memory in Technology stocks continues to be a headwind or not is still to be seen, but based on the relationship these stocks typically have with semiconductors, it looks like the real question isn’t if they break out from those former highs, but when.
What all this looks like: If we continue to see softness in our overweight Technology position, or if the individual stocks fall below their respective price targets, the areas of the market we’ll be moving to include the sectors listed above which have been the strongest during this period of rotation. We have been seeing large multi-period bases breaking out all over these sectors and there are many opportunities popping up outside of Technology that are becoming more and more interesting as the big winners from this year take a breather.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. The content is developed from sources believed to be providing accurate information.