Since our last newsletter, market conditions have remained positive, with continued strength both in the United States and globally. In fact, international stocks have outpaced US stocks this year after having lagged for the last 10-15 years.
The big news this month was what the Fed would do with interest rates. And as was expected, the Fed lowered rates by a quarter of a percent on Sept. 17th and the markets responded favorably, ending the week on a strong note and another record-setting week.
Markets were initially volatile, with many anticipating a “sell on the news” response after the announcement. It’s kind of like the letdown you feel after all the anticipation for a long-awaited event like a vacation. This feeling of letdown is due to the market already having fully anticipated the rate cut. So, when it’s done, there’s no new information to act on (remember that the financial markets are inherently future-focused). But the sell-on-the-news response ended up being short-lived and was soon replaced by optimism around the likelihood of two more cuts in October and December.
To offer further insight, I’d like to refer to a conversation I had last week with some dear clients that provides a broad perspective of what we’re seeing in the markets:
- Technical indicators (such as trend, momentum, volatility, etc.) continue to be strong.
- Fundamental indicators, such as those that measure whether stocks are over or undervalued, might be along the cautious side, with stocks being expensive (high P/E ratios). But looking out, as interest rates go down further, the lower interest rate environment could lead to better earnings, leaving more room for upside.
- There are some other dynamics that are supportive of a favorable climate going into 2026: Fed Chair Jerome Powell’s term ending in May 2026, the likelihood of further interest rate cuts, and midterm elections.
What can we be cautious about?
- In October, we will be entering this Bull market’s 4th year, and history shows bull cycles tend to last around 4 years.
- The percentage of stocks above their 200-day moving average continues to increase, recently closing at around ~70%, which is now what is referred to as the ‘Peak-Out Zone’. Reaching this zone does not signal an immediate decline; rather, it indicates that rallies often slow down above this threshold.
- We’re still in the month of September. As I’ve mentioned in prior newsletters, September is historically the weakest month from a seasonal standpoint. So, it won’t be a surprise if there is a pullback in the near horizon.
Some interesting things to note:
- Even though this Bull market will soon be in its 4th year, history also suggests that the fourth year of a bull run can still be positive.
- Even though we’re still in September and a pullback in the near horizon could happen, it would likely be just a run-of-the-mill ‘breather’ – a pause that refreshes – which can serve as a good reset for the markets.
- From a contrarian standpoint, the fact that many investors have remained skeptical of the markets and have continued to climb the “Wall of Worry” means that there are still people left to invest. It’s when everyone jumps on the same side of the boat (getting in) that it may be time to get out.
In closing, there is no crystal ball, and it is not possible to know with certainty how the markets will perform in the future. So our position at Global View is that we cannot – and do not – predict the future, but we do have a systematic plan to help our clients navigate and adjust as economic and market conditions change, with money managers ready at the helm to make course adjustments as needed.
Let me know if you need anything. See you next month!
