23-9-26-SPY

Chart: SPY 1-year daily

Last week was a central bank-intensive week, with policy decisions coming from major central banks including the Fed, Bank of England, and Bank of Japan. Volatility was primarily centralized around Wednesday’s FOMC decision, with the S&P 500 falling 2.8% and US 10-Year surging since then, as markets digested a “more hawkish” 2024 SEP than originally anticipated.

The market sold off last week, which looks to be a classic retest of the previous near-term low. The HCM-BuyLine® is still positive, so pullbacks should be considered buyable, and this pullback is no different. A lot of factors are putting pressure on the markets, such as the Fed’s hawkish tone, the United Auto Workers (UAW) strike, and what appears to be another government shutdown, which is getting old by the way. Despite headline risks in the near-term, we remain constructive through year-end as inflation remains key and we believe it is on a glidepath lower. We still see the market having a meaningful rally going into Q4, possibly going up to 4700 on the S&P 500.

23-9-26-TLT

Chart: TLT 1-year daily

The 20-year treasury just keeps going lower, from a high of around $107 in early 2023 to around $89.00 today, which is about a 16-17% drop YTD. But, if you go back to 2020’s high of $170.00 all the way to today’s price of $89.00, that is nearly a 50% drop in the price of TLT, and this is a government-backed bond. It could take a decade to recoup that much of a drop. You are better off with dividend-paying stocks.

The Chicago Fed National Activity Index (CFNAI) fell 0.23 points in August, down in three of the past four months, to -0.16. Its three-month average was little changed at -0.14, and has been in negative territory for the past ten months. Even so, it has not deteriorated to levels consistent with recession. It suggests continued economic growth at a slower pace in Q3.