Market at a Glance

 Dow 51349.98 | S&P 7704.13 | NASDAQ 26939.37 | Russell 2K 2835.57 | NYSE 23816.49 | Value Line Arith 13585.07

Seasonal: Bullish. October is the #1 month in midterm years for DJIA and S&P 500, and the second-best month for NASDAQ. Average midterm year gains: DJIA +3.2%, S&P 500 + 3.0%, NASDAQ +3.2%. Midterm October is typically where the “Sweet Spot” of the four-year-presidential-election-cycle has begun. Q4 of midterm years combines with Q1 and Q2 of pre-election years for the best three consecutive quarter span for the market, averaging 19.3% for DJIA and 20.2% for the S&P 500 (since 1949), and an amazing 29.4% for NASDAQ (since 1971).

Fundamental: Mixed. Were it not for persistently elevated inflation pushing the Fed to raise its key interest rate, the fundamental backdrop in the U.S. is rather firm. The Atlanta Fed’s GDPNow model is currently (as of Sept. 17 update) estimating Q3 GDP at 5.1%. U.S. unemployment rate is at 4.1% as a better than expected 162,000 net new jobs were added in August. AI investment is robust. Iran-US and Russia-Ukraine wars remain economic headwinds due to their impacts on energy prices.

Technical: Range Expanding. Since quickly rebounding off their respective late-March lows to early-June peaks DJIA, S&P 500, and NASDAQ have effectively been rangebound. DJIA and S&P 500 did briefly breakout to new all-time highs in August while NASDAQ did so earlier this week. Depending on index, either the upper boundary or lower boundary has been modestly expanded. Their respective ranges are likely to persist until the outlook for inflation and interest rates begins improving.

Monetary: 3.75 – 4.00%. Pushed by inflation metrics, the Fed increased its key interest rate at its September meeting. “Fed speak” since the meeting has pushed expectations for additional rate increases even higher. As of 5:30 pm EDT on September 24, the CME Group’s FedWatch Tool is showing odds at 70.9% for a hike in October. A hawkish Fed and tighter monetary policy are a headwind for the market now.

Sentiment: Still Bullish. According to Investor’s Intelligence Advisors Sentiment survey Bullish advisors stand at 51.9%. Correction advisors are at 32.7%, and Bearish advisors were 15.4% as of their September 23 release. Bullish advisors had pulled back to 48.1% in mid-September but quickly snapped back as NASDAQ hit a new all-time high this week. Overall sentiment is cautious yet consistent with the current relatively firm fundamental framework.