September Market Update

Prior Month in the Markets

After a late July early August 4% swoon in the S&P 500, the index rallied strongly for the remainder of the month, breaking the 2000 mark for the first time in history. The index closed the month up 4%, while the Dow Jones and the Nasdaq closed up 3.2% and 5.2% respectively.

Much of the gains were due to the strengthening of the US economy in multiple areas including employment which is trending over 200,000 new jobs per month. Investors continue to be on “Fed watch” in trying to determine when the US Central Bank will being to raise interest rates. Indeed, the Fed chairwoman remains dovish with respect to action on interest rates due to “slack” in the labor markets and tame inflation data. The Fed continues to telegraph that the first interest rate hike will take place in the first half of 2015.

Overseas, European economies continued to weaken, being heavily influenced by the conflict between Russia and the Ukraine. Interest rates on European bonds dropped further, weakening US rates in return as bond investors bought US Treasuries for safety. The interest rate on the US 10-year Treasury closed at 2.46% after sinking as low as 2.33% during the month of August.

Overall, US stocks remain the best performers since in Western countries the US remains the “best house in a bad neighborhood”. September is of known as one of the worst performing months of the year, but usually when the market is already down for the year, which is not the case in 2014. September market performance will likely be tied to the state of geopolitical conflicts, and the speed with which the US economy continues to improve, the data of which will influence the speed of Fed action in the coming quarters.

Below is a Year-to-Date chart of the S&P500, which can also be found here.

S&P 500 YTD Chart

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