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Weekly Market Recap | 09/09/2024

What happened last week

  • Price Action: Poor September seasonality may be to blame for a more than 4% decline in U.S. large caps.
  • AI Woes: A delayed reaction to Nvidia (NVDA)’s “good but not good enough” earnings report potentially drove broad-based weakness in the AI theme last week.
  • Jobs Data: The rate of job creation continued to slow; however, this was not a surprise to most of the market.

What we’re watching this week

  • Inflation: Consumer and producer inflation are the last big economic data releases before the Fed meeting.
  • Politics: Trump and Harris will face off tomorrow at 9 PM in their first, and potentially last, encounter on the debate stage.
  • AI Theme: Apple expected to unveil new AI features and pricing for new hardware, including its new phone, Oracle, and Adobe reporting 2Q earnings.

Horizon’s Investment Management Views

September began on a sour note as equities sold off heavily in last week’s holiday-shortened trading action. The S&P 500 declined over 4%, its steepest four-day start to a month since… August. There was little fundamental information about last week’s price action from our seat. Investors pointed to poor seasonality for stocks and delayed reaction to NVDA’s earnings in the final week of August as the rationale for the selling. While September is historically the worst month for the S&P 500, neither point is very convincing to us. Still, with shorter-term momentum signals favoring the bears, we may need a strong fundamental catalyst, such as a Fed meeting, for new all-time highs.

The jobs report confirmed what market participants already knew – the labor market is slowing. But it is not slow; the unemployment rate fell, and the 3-month average job creation remains healthy at around 120 thousand per month. The all-important data release did not conclusively settle the 25/50 bps debate for the Fed. We lean toward a smaller size cut with promises to do more if needed, but either way, it is clear that Powell and the committee want to lower short-term rates to further support the soft landing. Rate markets are reflecting this dynamic as yield fell sharply last week through the lows seen last December. We are watching to see how interest-rate-sensitive parts of the economy, such as housing and auto sales, respond in the coming weeks.

It is inflation week in the U.S. – consumer and producer prices are the main economic data points. However, we still think jobs matter more than inflation at this part of the cycle. Across the Atlantic, the European Central Bank is set to cut rates by 25 bps on Thursday; we will be watching their forward guidance on how much more to expect. The first, and perhaps only, debate between Trump and Harris on Tuesday night may move expectations of what to expect in November. Apple’s unveiling of its new AI-powered iPhone today and earnings reports from Oracle and Adobe later in the week will be important barometers for where the AI theme goes from here.

The commentary in this report is not a complete analysis of every material fact with respect to any company, industry, or security. The opinions expressed here are not investment recommendations, but rather opinions that reflect the judgment of Horizon as of the date of the report and are subject to change without notice. Forward-looking statements cannot be guaranteed. We do not intend and will not endeavor to provide notice if and when our opinions or actions change. This document does not constitute an offer to sell or a solicitation of an offer to buy any security or product and may not be relied upon in connection with the purchase or sale of any security or device. Before investing, an investor should consider his or her investment goals and risk comfort levels and consult with his or her investment adviser and tax professional. Equities are represented by the S&P 500 Index, which is a market- capitalization-weighted index of the 500 largest U.S. publicly traded companies. Large Caps are represented here by a broad-based large cap index; contact us for more information References to indices or other measures of relative market performance over a specified period of time are provided for informational purposes only. Reference to an index does not imply that any account will achieve returns, volatility, or other results similar to that index. The composition of an index may not reflect the manner in which a portfolio is constructed in relation to expected or achieved returns, portfolio guidelines, restrictions, sectors, correlations, concentrations, volatility or tracking error targets, all of which are subject to change. It is not possible to invest directly in an index..

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