US Market Insights (23-27 Sep): Soft Landing Hopes

• The S&P 500 $SPDR S&P 500 ETF Trust(SPY)$ $iShares Core S&P 500 ETF(IVV)$ $Vanguard S&P 500 ETF(VOO)$ and Nasdaq-100 $Invesco QQQ(QQQ)$ returned 1.39% and 1.44% last week, respectively.

• Major market movers included Nvidia (-2.6%), UnitedHealth (-2.91%), Pepsi (-3.48%), Philip Morris (-3.84%), FedEx (-11.08%), Apple (+2.56%), Meta (+7.1%), Amazon (+2.74%), Alphabet-A (+3.89%), and Microsoft (+1.09%).

• Key economic data this week include Manufacturing and Services PMI on Monday, Consumer Confidence on Tuesday, GDP and Unemployment Claims on Thursday, and PCE on Friday.

• Major earnings this week include Micron on Wednesday and Costco on Thursday.

 Things You Should Know Before Starting Your Week:

1)      S&P 500 Hits All-Time High on Soft-Landing Narrative

• The outsized 50bps rate cut demonstrated the Fed's determination to recalibrate the rate cut size to avoid an economic hard landing.

• Investors now view the chances of a soft landing for the economy as more likely.

• Federal Reserve officials, including Powell, will speak this week, providing further insights into the recent outsized rate cut and the U.S. economy. Investors should brace for more volatility this week.

2) Stocks Are Finally Coming Out of the Tech Sector’s Shadow

• The S&P 500 closed at 5702 on Friday, just 0.19% below its all-time high of 5713.

• The Nasdaq-100, on the other hand, remains 4.28% below its all-time high. The tech sector has lagged behind other sectors so far in September, indicating increased market breadth. Other sectors, such as those benefiting from rate cuts, have been driving the S&P 500 to new all-time highs.

3) Analysts May Start Raising S&P 500 Year-End Target

• BMO Capital Markets has just raised its S&P 500 year-end target to 6,100 as the index hit another all-time high of 5,713 last week.

• The current Bloomberg analyst consensus year-end target remains 5,483, representing a 3.8% downside relative to Friday's closing price of 5,702.

• We may see more upside for the S&P 500 as more analysts turn bullish and revise their target prices upward.

Source: Bloomberg, 23 Sep 2024

Conclusion:

• Due to election year seasonality, I remain short-term bearish in September and October, but I expect a rally in November and December.

• Currently, bears are running out of reasons to maintain their short positions. They can only hope that bad seasonality, worse-than-expected Q3 earnings, expensive valuations, and election uncertainties will drag the market down.

• I remain in the bear camp until the end of October, as I believe investors have already frontloaded much of the rate cut expectations.

• My preferred strategy is still to accumulate during a correction in September and October. However, investors should continue to allocate at least 70% of funds to the market to avoid missing out on a potential runaway rally.