September headwinds, commodities bull market: Top Takeaways

The major indexes (^DJI, ^IXIC, ^GSPC) close September's final trading day in the green as the S&P 500 records its fourth-straight winning month.

Yahoo Finance markets and data editor Jared Blikre analyzes the day’s top market movements, including the volatile trading month, headwinds anticipated for equities ahead in September, and signs of an early-stage bull market in commodities.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination Overtime.

This post was written by Ivana Freitas.

Video Transcript

The S and P records 1/4 winning month to cap a volatile August.

The finances, Jared Blicker joins us here with the trading day takeaways.

Jared bullet point number one.

All right.

Bullet point number one is August is a rap.

I mean, we knew that.

Um But let's go to some of the sector action and interestingly, I mean, it's easy to forget how bad the month was when we began.

I calculated this, this isn't on sectors, this is the S and P 500.

But at that August 5th low, we were tracking the worst August since 2011 in the S and P 500 at the month end.

It's the best August since 2021.

So that's a difference and then measured from the August 5th low.

It is the best August since 1984.

So I'm gonna show you something here.

We did this a week earlier in the week and I'm gonna update it.

This is the month to date sector staples.

Number one, real estate.

Number two, health care, number three utilities, number four, those are all defensive sectors.

Uh But you measure this over 19 days, which is from the eight five low.

Suddenly you got cyclicals in there, like financials, you got growth.

That's tech number two.

Also up 11% consumer discretionary and then industrial.

So, really things kind of turned around and it's been a pretty growth month so far.

And the good news is if you're long in the market, it's September.

Except that here we come, September is fraught.

It's not true.

Ok. Yeah.

So, let me, we've been going over some of this stuff and let me just show you some of the charts that I've been showing.

This is uh the 1st 10 in the last 10 days of the month and this big spike here, you want that.

Well, that's in July.

So that's in the rearview mirror.

This little one down here.

That was the second half of July, then the first half of August 2nd half of August.

All those were positive.

Now, we're facing September 1st 10 days, not so bad, but the last 10 days, uh, a little bit worse, at least on average doesn't have to happen this way.

Here's another look, this is V seasonality.

The purple line is what has happened this year.

The Cyan is what usually happens and you'll note that what usually happens is we get the highest peak of the year right in October.

So we are entering that time of year when we tend to have some V spikes.

And I would mention too in August at the beginning that 85 spike.

That was a big one.

Usually we see echoes.

So we might expect to see something like this doesn't have to be as high but been something this got to 65 you get something in the forties that's going to be another big downturn in stocks.

If it happens.

What about the data Jared?

Aren't we data dependent?

Yes.

Well, I'll tell you, you know, the power is going to be looking at data.

So we don't know what September is going to bring the data could turn around.

But let's review where we are with inflation, inflation has met the fed's objective.

The fed believes inflation is conquered for the time being.

Then you take a look at the labor market, the Psalm rule, the Claudia.

So rule recession indicator just triggered.

Uh B FA was out with a really compelling analysis today on the private payrolls, how they have just been not contributing as much to the overall picture.

And when we are at the current levels, well, that tends to mean we're in recession.

So we're getting a lot of bad data and then we're also heading into this bad time of year on average.

All right, we'll see what happens.

All right.

Number three.

There you go.

So we got this baby bowl in commodities.

And uh let me show you a really interesting chart.

This is from Bank of America.

This goes back to 1955 and the purple line is the 10 year rolling uh return on commodities.

So you take an index and this is when it's higher, these are almost 20% returns that we were seeing in the inflationary 19 seventies.

And in fact, this whole box here was an inflationary time.

And then this whole box here from about 2006, 2007 all the way into the pandemic.

That was a deflationary time.

What I want people to notice is right now, we are just getting on the positive side of these 10 year rolling returns and we are entering a potentially potentially secular inflationary period where we're just probably going to see these higher rates of inflation doesn't have to happen that way.

But my point is we could be in for a repeat of this earlier area in the late sixties and the 19 seventies and the early 19 eighties.

So we'll have to see what comes of that quickly as you look across the U you know, the universe of commodities, what should investors be concentrating on?

Uh I am looking at gold in particular that is at record highs.

We haven't even seen tail participation.

So I think there's a lot of juice in the can for gold.

I'm looking at wt I cru crude oil, 70 to $90.

And I'm also watching Co Coffee here.

I was just pointing out we got a 10 year chart.

This is a big cup that we have on this uh coffee chart.

So a cup of coffee means higher, higher prices for bar and Sazzy Jared.

Thank you buddy.

Appreciate it.