4 reasons probabilities favor S&P 500 gains 2%-3% in September. Array ( [cookie] => d0a212-9bc12e-e6fe3f-f10f90-3c3785 [current_usage] => 2 [max_usage] => 2 [current_usage_crypto] => 2 [max_usage_crypto] => 2 [lock] => [message] => [error] => [active_member] => 0 [subscriber] => 0 [role] => [visitor_id] => 165022 [user_id] => [reason] => Usage under limits [method] => ) 1 and can accesss 1

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Due to a travel disruption there will be no macro minute video 8/29.

Barring a stupendous rally in the next 2 days (could happen), August will end up a down month for equities. The extended choppiness of August has turned many investors bearish, with many believing the highs for 2023 were made in July 2023. As many of our clients know, we warned of the chop to come in August (see our note from July 31) and Wednesday last week (8/22), we timidly went back to “risk on” on the open Wednesday. Consensus is now warning that equity markets could be soft in September. But we have 4 reasons to expect the exact opposite and the S&P 500 could gain 2%-3%:

• First, we expect incoming macro data over the next week and few months to show a significant slowdown in inflationary pressures — both for core inflation and for labor markets. This week is a particularly heavy data week as we are still expecting July PCE and the August jobs report.
• July JOLTS (job openings) was a huge downside reading with 8.8 million vs 9.5 million consensus. And the prior months was revised downwards by 417k, the largest ever monthly negative revision. The details show the jobs market has weakened significantly, and “hirings” slowed from 5.9 million to 5.77 million. And the ratio of openings per available worker is down to 1.5, the lowest since Sep 2021.
• Second, we expect markets to eventually price 0% probabilities of a Fed hike in Sept and Nov. Post-Jackson Hole:
  – Sept hike odds surged from 12% to 23%, settled to 14%
  – Nov hike odds from 30% to 48%, settled to 37%
• Given the glidepath of falling inflation and labor market strength, and the anticipated downshift in inflation expectations, we believe these odds will fall to 0%. And this should allow interest rates to commensurately fall. The 10-year yield is already down 30bp from the 4.35% peak and we think it could fall towards 4% in Sept (TLT 0.12% ). This would be supportive of stocks.
• Third, investors flipped pretty solidly bearish in August. There are a plethora of ways to measure this and our Head of Technical Strategy has cited several. But the one I would like to share comes from ES of SF, who noted:
  – equity put/call ratio
  – ratio >1.0 6 of last 9 sessions
  – ratio >0.95 7 of last 9 sessions
  – higher ratio means more bearish betting
• Sentiment has turned bearish, particularly given the rise in rates and the commentary post-Jackson Hole reverted to the same negative views that came out of August 2022. 2022 is so different and we believe this past week is more evidence of the anchoring bias of “hawks”
• Fourth, seasonals strongly argue that September will be an up month.
  – Since 1950,
  – September median return is -0.3%
  – win-ratio only 44%
• But when markets map similar to 2023:
  – Since 1950
  – S&P 500 up >15% thru end of August
  – August is a down month
  – September median gain +3.3%
  – win ratio is 86%, or 6 of 7 instances
  

BOTTOM LINE: We see S&P 500 gaining 2%-3% in September, pushing back to July highs of >4,600

Bottom line, we see the S&P 500 gaining 2%-3% in September, or +100 to +150 points. And this implies pushing back to the July 2023 highs. There are some risks:

• Fed FOMC September rate decision is Sept 20. We still see no hike
• UAW could authorize a strike this month. We will highlight market risks in a week or so
• This is a non-consensus view but consistent with technical commentary from Mark Newton

Key incoming data August

• 8/1 10am ET July ISM Manufacturing Tame
• 8/1 10am ET JOLTS Job Openings Jun Tame
• 8/2 8:15am ADP National Employment Report Hot
• 8/3 10am ET July ISM Services Tame
• 8/4 8:30am ET July Jobs report Tame
• 8/7 11am ET Manheim Used Vehicle Index July Final Tame
• 8/10 8:30am ET July CPI Tame
• 8/11 8:30am ET July PPI Tame
• 8/11 10am ET U. Mich. July prelim 1-yr inflation Tame
• 8/11 Atlanta Fed Wage Tracker July Tame
• 8/15 8:30am ET Aug Empire Manufacturing SurveyMixed 
• 8/15 10am ET Aug NAHB Housing Market IndexTame
• 8/16 8:30am ET Aug New York Fed Business Activity SurveyNeutral
• 8/16 2pm ET FOMC MinutesMixed 
• 8/17 8:30am ET Aug Philly Fed Business Outlook Survey Positive
• 8/17 Manheim Aug Mid-Month Used Vehicle Value IndexTame
• 8/23 9:45am ET S&P Global PMI Aug PrelimWeak
• 8/25 10am ET Aug Final U Mich 1-yr inflationMixed
• 8/28 10:30am ET Dallas Fed Aug Manufacturing Activity Survey Tame
• 8/29 9am ET June S&P CoreLogic CS home price Tame
• 8/29 10am ET Aug Conference Board Consumer Confidence Tame
• 8/29 10 am ET Jul JOLTS Tame
• 8/31 8:30am ET July PCE
• 9/1 8:30am ET August NFP jobs report
• 9/1 10am ET August ISM Manufacturing

Key incoming data July

• 7/3 10am ET June ISM Manufacturing Tame
• 7/6 8:15am ADP National Employment Report Hot
• 7/6 10am ET June ISM Services Tame
• 7/6 10 am ET May JOLTS Tame
• 7/7 8:30am ET June Jobs report Mixed
• 7/10 11am ET Manheim Used Vehicle Index June Final Tame
• 7/12 8:30am ET June CPI Tame
• 7/13 8:30am ET June PPI Tame
• 7/13 Atlanta Fed Wage Tracker June Tame
• 7/14 10am ET U. Mich. June prelim 1-yr inflation Mixed
• 7/17 8:30am July Empire Manufacturing Survey
• 7/18 8:30am July New York Fed Business Activity Survey
• 7/18 10am July NAHB Housing Market Index in-line
• 7/18 Manheim July Mid-Month Used Vehicle Value Index Tame
• 7/25 9am ET May S&P CoreLogic CS home price Tame
• 7/25 10am ET July Conference Board Consumer Confidence Tame
• 7/26 2pm ET July FOMC rates decision Tame
• 7/28 8:30am ET June PCE Tame
• 7/28 8:30am ET 2Q ECI Employment Cost Index Tame
• 7/28 10am ET July Final U Mich 1-yr inflation Tame

Key data from June

• 6/1 10am ET May ISM Manufacturing Tame
• 6/2 8:30am ET May Jobs report Tame
• 6/5 10am ET May ISM Services Tame
• 6/7 Manheim Used Vehicle Value Index May Tame
• 6/9 Atlanta Fed Wage Tracker April Tame
• 6/13 8:30am ET May CPI Tame
• 6/14 8:30am ET May PPI Tame
• 6/14 2pm ET April FOMC rates decision Tame
• 6/16 10am ET U. Mich. May prelim 1-yr inflation Tame
• 6/27 9am ET April S&P CoreLogic CS home price Tame
• 6/27 10am ET June Conference Board Consumer Confidence Tame
• 6/30 8:30am ET May PCE Tame
• 6/30 10am ET June Final U Mich 1-yr inflation Tame

Key data from May

• 5/1 10am ET April ISM Manufacturing (PMIs turn up) Positive inflection
• 5/2 10am ET Mar JOLTS Softer than consensus
• 5/3 10am ET April ISM Services Tame
• 5/3 2pm Fed May FOMC rates decision Dovish
• 5/5 8:30am ET April Jobs report Tame
• 5/5 Manheim Used Vehicle Value Index April Tame
• 5/8 2pm ET April 2023 Senior Loan Officer Opinion Survey Better than feared
• 5/10 8:30am ET April CPI Tame
• 5/11 8:30am ET April PPI Tame
• 5/12 10am ET U. Mich. April prelim 1-yr inflation Tame
• 5/12 Atlanta Fed Wage Tracker April Tame
• 5/24 2pm ET May FOMC minutes Dovish
• 5/26 8:30am ET PCE April Tame
• 5/26 10am ET U. Mich. April final 1-yr inflation Tame
• 5/31 10am ET JOLTS April job openings

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35 Granny Shot Ideas: We performed our quarterly rebalance on 7/18. Full stock list here –> Click here

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