September 2023: Markets Trending Lower Into Fall

September 2023 Markets Trending Lower Into Fa

Markets finally received their anticipated cooldown during the month of August. We discussed the markets extended run in our August article and the likelihood that we would see some cooling off in the next few weeks as markets were extremely overbought and extended. Right on time, we began to see selling pressure that started in the first week of August. By the time the third week of the month, the S&P 500 was down over 4%. There was a decent recovery in the final week of the month and markets ended only about 1.5% down. The question remains are markets now closer to realistic levels or should we expect more selling as we head into the fall.

As we are heading into the seasonally weaker part of the stock market cycle, I would expect to see additional areas of pressure for the short term. Inflation has become a concern once again as August PMI numbers came in hotter than expected. This will likely make it impossible for the Federal Reserve to consider cutting interest rates anytime soon. This is coupled with concerning international economic data that could possibly show cracks in the strength of global markets. However, we continue to see financial analysts downgrade their perceived risk of recession in favor for a soft landing. It’s an interesting dichotomy.

Despite headwinds, investor volatility remains very low. This means generally investors are unbothered by current market events. Everyone still believes that everything is fine. And it may very well be just fine, particularly in the intermediate term. However, I think it’s realistic to expect a few more bumps as we navigate through the rest of September and into October. Last month’s market activity brought RSI numbers down from their elevated extremes. RSI (or relative strength index) measure price movements of stocks. Anything above 70 is extremely overbought. We were at 69.7 on July 30th and are currently at 55. The pullback also has the S&P 500 trading much closer to it’s 50 day moving average. Both are signs that the extremely overheated market has cooled off at least slightly.

What does this mean for the investor? While we could certainly see a pickup in volatility during September, pullbacks to support could still be advantageous to add to equity exposure as needed. This is known as dollar cost averaging. With that said, there are certainly risks to remain mindful of. The risk of a recession from tighter financial conditions is one of them. This doesn’t mean you should avoid stocks but rather be cognizant of how much risk you are willing to take on and what time horizon exists between now and when you may need to use your investments. Review your investment policy for your portfolios and make sure you are following your rules. Remember, your investments should all have specific roles in your investment process. Once they fail to satisfy them, they need to go! As always, you can always give us a call at Victory if you have any questions. We are always happy to help. Have a great start to fall and we will be back in October.


Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.

Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.

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