Fun Facts about September
- Birthstone: Sapphire
- Flower: Aster
- Zodiac signs: Virgo and Libra
- September’s name comes from the Latin word septem, meaning “seven.” This month had originally been the seventh month of the early Roman calendar.
- September is the first of the autumn months in the Northern Hemisphere. Its Southern Hemisphere equivalent is March.
- September 6—the first Monday in September—is Labor Day.
- September 22 marks the start of fall. This year’s Autumnal Equinox occurs at 3:20 P.M. EDT on Wednesday, September 22. At this time, there are approximately equal hours of daylight and darkness.
Stocks continued their march higher in August, defying history as one of the worst months for stock market performance. The S&P 500 moved up 2.9% for the month and is now up over 20% for the year. This rise will be the seventh straight positive month for the index. It is even more impressive considering the negative impacts that the recent surge in Covid has inflicted on our economic recovery.
Supply chains appeared to be repairing themselves last month but as the delta variant of covid continues to spread, we seem to have stalled. For example, there are currently 44 container ships off the coast of California waiting to be off-loaded. Usually, there is no more than one! Shippers are now seeing delays of over 1 month to get their cargo where it needs to be. These delays will have a negative impact on Q3 and Q4 numbers this year for many companies so keep that in mind when looking at potential investments.
Another factor that could send ripples through the markets is inflation. The Federal Reserve doesn’t seem to be too worried and sees many price increases, such as fuel and food, to be only temporary. Of course, temporary is a relative term so we’ll just have to wait and see.
Take a look at the Outlook section below to see what events could move the markets over the short term.
Bond prices ended flat for the month across the board: government, corporate, and junk. The monthly chart for most bond indices looked like a profile of a roller coaster as inflation fears ebbed and flowed, but eventually ended up where they were at the beginning of the month. I think with the Fed now letting us know that they will start tapering their asset purchases, my expectation of lower bond prices at the end of the year should still pan out.
The 10-year US Treasury note is now yielding 1.30% and the 30-year bond is at 1.92%, both slightly higher than last month. These rates should start to rise as the fed pumps the brakes on buying so many of these bonds every month, aka tapering. Any noticeable uptick in inflation will get these rates moving higher as well.
Interest rates moved a bit higher on the long end of the curve but were mostly flat once again in August, very similar to last month’s moves. CD, money market, and savings account rates are still historically low. These rates should move higher over the rest of the year, but the savings rates will most likely still be too low to keep up with inflation.
Currently, the average savings account is paying 0.27%, exactly the same as the last 3 months. Although safe from market fluctuations, putting all your eggs in a savings account is not the best bet, especially if you need to grow your account value. Plus, you have to pay taxes on that interest.
The 1-year CD interest rate is now averaging 0.46%, down a bit from last month. The 5-year CD rate fell slightly as well, now yielding 0.70%. Hopefully, these rates will start to head higher over the next few months.
Mortgage rates changed very little during the month of August. Currently, the 30-year rate sits at 3.02%, the same as one month ago. Rates continue to remain incredibly low, which is great news for home buyers, real estate investors and refinancers. Home prices rose at a record pace for the third consecutive month. In fact, home prices rose in all 50 states in August. These price increases are due to lack of inventory, low mortgage rates, and population shift from urban apartments to suburban homes due to covid. These price increases should put some upward pressure on mortgage rates but so far, rates haven’t move that much.
Oil prices dropped as much as 17% at one point in August but rallied toward the end of the month to only be down about 7%. This snapped oil’s 4-month rally. Even with this month’s drop, prices are up nearly 42% in 2021, mostly due to recovering from the pandemic. The price for a barrel of oil settled near $68.50.
There are a few reasons why oil prices have come down in August. First, OPEC plans on increasing their output by 400,000 barrels a day. Second, the resurgence in covid due to the delta variant has curbed travel, shipping, etc., resulting in less fuel consumption.
Not surprisingly, gasoline prices dropped slightly in August. Prices at the pump are averaging about $3.16 per gallon, about 2 cents lower than a month ago. Texas has the cheapest gas right now, at $2.78. California has the most expensive at $4.40 per gallon. FYI, a year ago, we were paying $2.23.
Check out the prices at the pump in your area: Gas Buddy.
Outlook
Events on the horizon that could move the markets in the near term:
- Infrastructure Bill: The Senate approved their version of the bill and now has to go to the HOR for passage before landing on Biden’s desk for his signing into law. Expectations are for it to be a done deal by the end of September. If so, we should see a nice leg up for industrial, materials, and heavy machinery stocks that haven’t already priced it into their stock price.
- Coronavirus: With the delta variant spreading through the U.S. population so quickly this summer, it may have convinced some people who didn’t want to get the vaccination to go ahead and get it. People with at least one dose jumped to 62% from 54%, more than double the rate of vaccinations from last month. That’s great news but still nowhere near the numbers that we need to put this pandemic behind us for good. New cases for this wave look like they may have peaked in late August which means we should see covid deaths peak in mid to late September. We’re currently averaging over 1,300 deaths per day, which is just horrible. With the Pfizer vaccine now fully approved by the FDA, many institutions and companies are mandating vaccines, which should get our vaccination numbers up to where we can ease the pressure on our health care infrastructure and personnel. This will, in turn, help supply chains and the economy in general, which is all good for the stock and bond markets.
- Fed & Inflation: The Fed just held its annual Jackson Hole, WY meeting (virtually, for the second year in a row). They started laying the groundwork for tapering its asset purchases but have no plans to start raising interest rates. This has eased investors’ fears as evidenced by the continued rise of stock market indices. This should bode well for stocks for the remainder of the year but not so much for government and high-quality corporate bonds.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
