“What would you do?” When a friend asks, giving advice becomes both a privilege and a responsibility. Suddenly you're a lawyer, doling out caveats and disclosures, referencing the differences between you and the advice seeker. Finally comes the advice: “BUT, if I were you…”
Of course, your friend hears right through to the core message, skipping the caveats-–and so does anyone else who asks for advice. It’s why I took the act of providing the advice I gave clients over my career as seriously as I do for my friends—reviewing and fine-tuning delivery over time. The commentary and opinions I provide here, while not advice, are no exception.
On August 30, I shared there were several signs (technical and fundamental) that the markets may be under pressure in the near term. Since then, the broad US stock markets are down -1.5% or more.
I followed this up with a post on September 6 stating that there were several looming events that could add more negative pressure.
AND my concerns around the events are not yet unfounded.
The odds of a semi-government shutdown are rising after House Republicans failed to move ahead on a vote advancing a Defense bill last week. The bill had become tied to the bigger debate around the government’s budget and negotiations around this continue. So while a debt ceiling bill was passed earlier in the year, the government (mostly in the House) has not agreed on how they will split up the funding. They need to figure this out before the end of this month in order for it to stay fully open. After that, funding for some areas, like the military, are cut. Longer term, I believe this particular episode won’t matter too much, but it could contribute to market volatility in the near term, and somewhat detract from overall economic growth.
Other growth headwinds include the resumption of student loan payments (starting October 1) and the potential United Auto Workers strike, the latter of which I was concerned about for anyone who invests in the traditional auto companies. The strike is starting off small, with a limited number of plants and targeting the production of certain auto models. Broader strikes will depend on how negotiations develop. While I think a deal will be reached before it gets too costly, it adds to general uncertainty in production planning and competition in the EV space for these automakers. From a broader market perspective, the strike on its own is unlikely to have a big impact on the markets given traditional autos are less than 1% of the S&P 500 Index (although it doesn’t help with sentiment).
Lastly, another event to look out for is the next Fed meeting, set for today at 2pm. As I previously shared, I believe the Fed could pause on any interest rate hikes (now in line with market expectations), monitoring the effects of their previous action. After all, there have been continuing signs of falling wage growth and inflation. However, I expect DJ Pow Pow to still talk tough, to keep the door open. Something to look more closely at from this meeting is the “dot plot.” This shows the interest rate and economic projections of the Fed committee. If they raise their projections for Fed funds interest rates for 2024 (above 4.6%) and/or the “longer run” number, you could see a negative market reaction—adjusting for the expectation of higher rates for longer.
Btw, this dot plot is the Fed’s own form of advice, where they ask each other “wwyd?” They take it quite seriously (with caveats of uncertainty) and have been fine tuning it for years. So it’s worth listening and considering.
However, one thing I’ve seen personally and through my work with clients, whether it's about your money or other parts of life; the best advice often comes from yourself. That internal voice is usually a good guide if you can stop to listen to it—no caveats needed.