Summary:
Weekly Market Update with John Rothe (Riverbend Investment Management) – October 13th, 2023
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John Rothe discusses market seasonality, noting historical patterns where certain months are strong and others are weak. Historically, the end of the year is a strong cycle for the market, while August and September are weaker months.
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This year saw weak performances in August and September, raising questions about whether this was due to seasonality or a structural change in investor sentiment.
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October has so far followed historical patterns, with initial volatility followed by improvement as the month progresses.
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Last week’s focus was on market support and resistance. The market’s attention was on a specific pink line, which also marked the 200-day moving average. A bounce in the market was anticipated, and a significant bounce was observed, indicating a return of buyers.
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Momentum indicators show a positive rising momentum, and market breadth indicators show an increasing percentage of stocks trading above their 50-day moving average.
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The U.S. dollar’s rising trend has negatively impacted stocks. A weaker dollar is desired, and recent trends suggest a potential shift from positive to negative momentum.
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Expectations regarding the Federal Reserve’s actions later this year are influencing the market. Current probabilities suggest the Fed will maintain its current position in its November meeting.
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Consumer behavior indicates confidence in the economy, with discretionary stocks outperforming staples.
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The S&P 7 (major stocks) have been the primary drivers of the S&P 500’s performance this year. There’s a broad market push, indicating expanding market breadth.
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Historical data suggests that the year following a bear market often sees impressive market performance. If this trend holds, the last quarter of 2023 could be strong for the market.
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Next week is relatively quiet in terms of economic data, but the speech by Fed Chair Jerome Powell on Thursday will be closely watched for any hints about the Fed’s future actions.
John concludes by inviting questions and can be reached via email at john.rothe@riverbendinvestments.com.
