Weekly Newsletter- Week of 9.12.2021
History Points to Another September Selloff
Investors are always looking for indicators that may provide clues into a stock’s future price action and looking at historical information can be a great data point. And if history is any indication, September could be another rough month for stocks! The DOW dropped more than 270 points to end the week, signaling its fifth straight loss. Both the S&P and the Nasdaq each shed recent gains and ended the week down nearly 2% each respectfully. As we take a closer look at the charts, it appears the September’s recent selloff may continue. Historically, September has always been a rough month for stocks, with Sept 17th symbolizing the optimal sell point for equities. It appears investors may be preparing for extended selling as September has historically been the weakest month for stocks looking as far back as 1945.
What’s Driving the Selloff?
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Supply Chain Woes Continue: Last week several homebuilders reported earnings and presented underwhelming guidance for the upcoming quarter. Key materials needed for homebuilding continue to spike in price as resources are limited. Demand remains high, but these issues are depressing overall home sales.
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The Fed: We’ve talked extensively about the Fed and how Powell is managing inflation. Though we continue to hear inflation is only ‘transitory’ pricing pressure remains which continues to influence stocks.
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Congress: Though the additional bonuses previously added to unemployment checks have now ended, an additional aid package is currently being passed through congress. This time, Democrats are looking to pass $3.5T in aid aimed at providing additional support to childcare, education, health care, and climate change just to name a few. This bill is being called 'the reconciliation package’, and with that level of potential spending coming down the pipe, investors are anxiously watching government spending.
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Concerns Abroad: We reported extensively last week on the trouble with investing abroad especially in Chinese stocks. It seems we are forced to regularly report on Chinese equities and regulatory concerns as it appears the rules are constantly changing. China continues to send rippling effects across US stocks.
Despite all the positive sentiment within the markets as of late, it seems like September may continue to be a rocky month. After a huge August, equities were due for a pullback. The markets are forward-looking as this may represent potential buying opportunities as stocks take a breather.
Courts Hand Apple a Big 'L'
A new ruling by a federal judge just handed Apple their biggest setback in quite some time. The new decision from the courts has determined that the company's App Store policies are considered "anti-competitive", which sent the stock tumbling down. When a company has been ruled as anti competitive, it means the government has found them guilty of reducing competition in the market. When you hear stories surrounding Apple, Amazon, Facebook, or Microsoft needing to testify on the hill, it's often due to competition concerns.
The issue occurs when fear rises that one company is becoming too big. In the case of Apple, they were recently sued by Epic Games (developers of widely popular videogame “Fortnite”) for restrictions put in place for developers to use the Apple App Store platform. The violation occurred when Epic Games noted a 30% commission tax that Apple implores to use its app store. The courts ruled "Apple is engaging in anticompetitive conduct under California competition laws. Apple stock dropped nearly 4% after the ruling.
Bitcoin Can’t Hold $50K
Cryptocurrency has been on a tear as of late! Bitcoin briefly touched over $50,000 last week, capping a monthly gain of nearly 20%. Though the digital asset has shed those heavy gains and currently sits just over $45,000. The entire crypto market had been pushing higher as Ethereum nearly $4,000, a key level of resistance for that asset. Despite the recent pullback, it’s obvious cryptocurrency is once again viewed favorably by the markets. Bitcoin confidence appears to have been renewed as investors are looking to see if/when the asset can once again touch its all-time highs over $60K!