Market Musings 9/6/2023
Quick thoughts on the markets and major portfolio news. Not on Ursa yet? Download Ursa from the App Store!
Investor optimism for the “Goldilocks” soft landing cooled in August before heating up again to end the month…
Fresh off July YTD highs, August initially tumbled as economists started doubting the perfectly-balanced “Goldilocks” soft landing scenario for the US economy. However, eternal optimism returned with mixed data to end the month. The S&P 500 ends August down -2.5% but recovered from down -5% mid-month.
In our view, nothing really changed in August despite the rollercoaster of investor sentiment. The never-ending stream of economic data was fairly consistent throughout the month－mixed. Strong #LaborMarkets remained persistent with signs of moderating. Inflation continues to decline, but still higher than the Fed’s target with the stickiest portion remaining. Consumer continues to spend, but credit card debt is ballooning. We view August’s pullback more due to investors just getting cautious with the S&P 500 starting the month up +16% YTD.
If anything, a swath of #CreditCrunch negativity may have tipped markets in the other direction. In early August, Fitch Ratings downgraded the US’s long-term debt rating to AA+ from AAA due to expected fiscal deterioration, growing debt burden and erosion of governance. It was followed by Moody’s warning it could cut credit ratings for 6 large US banks and then the S&P Global downgrading 5 US regional banks the week after. While considerably impacting the Financial sector (underperformed S&P by ~6%), many market thought leaders were pretty skeptical of the downgrades/warnings.
Hoping the #AI poster child would jumpstart the rally again, markets rallied ahead of Nvidia’s earnings. Nvidia definitely did not disappoint with its outlook blowing out even sky-high whisper number expectations. The stock ran up +6% afterhours as #Growth investors eagerly awaited another market rally spark. However, the #AI trade plummeted the next day as investors ended up selling the news with non-Nvidia #AI names underperforming the most. Despite the day after disappointment giving up the lead up gains, markets did retrench from that point with a strong recovery in the last week to end August.
While market optimism is brewing again, we remain cautious. We haven’t really seen any real macro trend shift just more ambiguous mixed data. However, we believe September will be a big month with a potential CPI inflation re-acceleration and Fed meeting. We don’t believe #RisingYields is over yet and expect at least one more rate hike later this year. In our opinion, investors continue to be too bullish on an extremely tight window for the “Goldilocks” soft landing.
As usual, we still recommend regular contributions to portfolios, but look for market pullbacks for more advantageous opportunities to add more.
No Ursa account yet? Download Ursa here!
As of the publish date, Ursa portfolios may own NVDA. The stocks mentioned in this article may cease to be owned by Ursa portfolios at any point.
The statements, opinions and analyses presented here are provided as general information. This article is the opinion of the author. Anything within this article should NOT be considered an investment recommendation or advice. See Ursa’s full disclosures here.
Original Photo by Olia Nayda.