Weekly Market Commentary

September 9, 2024

The Markets

Investing in September can be like biting into a jelly doughnut and finding boiled cabbage—full of unwelcome surprises.

“History suggests September is the worst month of the year in terms of stock-market performance,” reported Isabel Wang of Morningstar. The Standard & Poor’s (S&P) 500 Index “has generated an average monthly decline of 1.2%...dating back to 1928, according to Dow Jones Market Data.”

One reason for the sharp stock market decline last week appeared to be concerns that the Federal Reserve may have waited too long to lower rates. During the week, economic data continued to present a mixed picture of the U.S. economy. The employment report released on Friday showed the United States added about 142,000 jobs in August—a significant increase from July—and that average hourly earnings were up 3.8 percent year over year. In addition, the unemployment rate ticked lower to 4.2 percent.

However, the report wasn’t quite as rosy as those numbers suggest. Fewer jobs were created than economists had predicted and “downward revisions from the two previous months suggest that the labor market is cooling faster than the initial data may indicate,” reported Lauren Kaori Gurley and Rachel Siegel of The Washington Post.

The information has some pundits speculating that Fed officials may opt for a larger rate cut than originally anticipated at the Fed meeting in September, according to CME FedWatch. On Friday, Federal Reserve Governor Christopher Waller said he support a September rate cut and was “open-minded about the size and pace of those reductions,” reported Ann Saphir of Reuters.

In recent weeks, investors have been feeling quite bullish, according to the AAII Sentiment Survey. During the last two weeks of August, more than 50 percent of survey participants indicated they expected the stock market to rise over the subsequent six months. The level of optimism among survey participants came close to the survey’s all-time high (52.9 percent on December 20, 2023) and remained well above the historical average of 37.5 percent.

Last week, investor sentiment shifted. Fewer participants were bullish – and fewer participants were bearish. The number of respondents who were neutral increased, which means they think stock prices will remain relatively unchanged over the next six months.

By the end of last week, major U.S. stock indices had moved lower, while bond markets rallied. U.S. Treasury yields fell across the yield curve and finished the week with the yield on the benchmark 10-year U.S. Treasury above the yield on the 2-year U.S. Treasury for the first time since July 2022, reported Connor Smith of Barron’s.

When markets are volatile, as they were last week, it’s normal for investors to worry. Before making any changes in response to short-term market fluctuations, remember that historical performance supports the idea that staying invested is a sound way to pursue long-term financial goals. If you have any questions about recent market volatility or your investments, please get in touch.

S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance; MarketWatch; djindexes.com; U.S. Treasury; London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

THE STRANGE STORY OF TRANSPARENT MICE. A big challenge for medical and biological researchers is an inability to see inside living creatures. Sophisticated imaging techniques are helpful, but they don’t always provide a clear picture. That may be about to change. Researchers at Stanford University:

“…found that a yellow food dye called tartrazine, used to color everything from M&Ms to Gatorade, can, if applied to the skin of a live mouse, make the tissue transparent. The effect was pronounced enough for researchers to see blood vessels beneath the animal’s scalp, some of its abdominal organs and a number of the more delicate muscles in its legs—sights hitherto only directly visible through dissection. When the dye was washed off, the skin’s natural opacity returned,” reported The Economist.

Why does yellow food dye make it possible to see through mouse skin? In general, skin is opaque because fats, protein, and water scatter light and prevent it from passing through the skin. Food dyes are great light absorbers. As a result, a combination of tartrazine and water applied to mouse skin helps light travel more directly through the skin, making it transparent.  

The discovery may have a wide variety of applications, according to a source cited by Carolyn Y. Johnson of The Washington Post. The technique could someday help researchers:

• Observe brain activity;
• Diagnose deep tumors without surgery;
• Locate veins more easily for IVs and blood draws; and
• Make cosmetic procedures (like tattoo removal) more precise.

The lead researcher on the study, which was published in the print issue of the journal Science on September 6, Dr. Zihao Ou told The Economist, “It will take more work before humans are added. As human skin is ten times thicker than that of mice, replicating the tetrazine experiment would require far longer application periods…It is also unclear just how reversible such a process would be.”

Clearly, there is more work to be done!

Weekly Focus – Think About It

“The real voyage of discovery consists not in seeking new landscapes, but in having new eyes.”

 —Marcel Proust, novelist