Look Beyond the September Effect

The lackluster performance of the three major US market indices has raised concerns among investors as we entered the historically worst month of the year, September. This phenomenon even has a nickname: “The September effect.”

Inflationary Fears

With all three of Wall Street's major indices posting weekly declines, there are growing fears regarding the upcoming US CPI and PPI inflation data set to be released this Wednesday. The recent surge in oil prices to a nine-month high, driven by tightening oil supplies from Saudi Arabia, has indeed fueled inflation concerns. It is expected that oil prices will remain at elevated levels, as OPEC+ is likely to keep the market tight heading into the winter. Additionally, the recent stronger-than expected services activity data and the decline in weekly jobless claims may imply a sustained level of inflation.

Risk of Recession

While there are concerns of a potential economic slowdown, it's important to acknowledge that the US economy has shown resilience despite the tightening monetary policies. Although inflation may not have decelerated to the desired level, the Federal Reserve recognizes the lagged effect of rate hikes and may opt to keep rates steady at the next meetings. This approach provides a longer runway for the tight monetary policy to take effect and increases the likelihood of the US avoiding a recession, even though economic growth is expected to slow down.

Opportunity with Market Pullback

The pullback in September, if it follows historical trends, may offer an excellent opportunity for both traders and investors. There is no "right time" to enter the market during pullbacks. Some investors may consider using technical analysis to identify key price levels for short-term trades and profit from the volatility, while long-term investors shpuld look to purchase fundamentally strong companies at a discount, disregarding short-term volatility as a deterrence.

No one can accurately predict the extent of a pullback, so it is crucial to be prepared for the possibility of further market declines. 

Having a clear plan and setting stop losses will be key for traders. Most importantly, stop trading if your emotions are clouding your judgment, as emotional decisions can derail your trading plan.

For long-term investors, a pullback presents an opportunity, but it's important to stick to your investment plan that aligns with your budget. Avoid panic selling and continue to invest regularly.

Personally, I am considering rotating into sectors that may have underperformed, such as healthcare and consumer staples. This includes companies like $UnitedHealth(UNH)$ , $Pepsi(PEP)$ , and $Procter & Gamble(PG)$ . In the event of a recession, these stocks are likely to outperform, as investors tend to look for more defensive stocks. 

Additionally, I will keep an eye on key levels to consider increasing investments in tech giants like $Microsoft(MSFT)$ , given their significant potential in the field of artificial intelligence and existing strong economic moat. Pullbacks on the current valuations for other tech darlings such as $Amazon.com(AMZN)$ May present other attractive opportunities too. 

What are your plans for the last few months of 2023, my fellow Tiger friends? [Grin]  

@TigerStars @CaptainTiger @Tiger_chat @MillionaireTiger @TigerEvents