September Effect and Trump Tariff
September 6, 2024 | Sage Capone
Key Points for Hawaii Investors
- September Effect: September is historically a bad performing month for the market
- Trump Tariff: The proposed Universal Tariff will be a tax on US Consumers.
September Effect
Lizz Ann Sonders, Charles Schwab and Bloomberg, provided a sector performance with the S&P 500, year to date and month to date. Risk assets did not have a great week.
Lizz Ann Sonders, Charles Schwab, provided a graph that shows the S&P 500 average performance by month since 1928. As you can see, September is historically a bad performing month. As I mentioned in my client video this past week, September is a transition month when individuals and traders come back from vacations and reassess their portfolios and make asset allocation changes.
At the same time, we have the election year, when you tend see a decline in the 3rd Quarter historically followed by a bump up in the 4th Quarter. Again, we can’t predict the future, but this is something to keep in mind in September when reviewing your portfolio.
In other news, we had the employment report which showed an unemployment rate that dropped to 4.2% and employers added 142,000 jobs in August. The jobs report was weaker than expected but more data needs to be analyzed before the soft landing is put in doubt.
Another headline, the US yield curve dis-inverts achieving a positive slope. The yield curve has been an indicator that has not been as trusted since the post-covid economy challenged traditional theory.
Next week, the market will see more important with the small business optimism and consumer price index (inflation) which will provide the Federal Reserve more data on their ultimate decision for the September 18th FOMC Meeting with reducing the federal funds rate.
John Williams, The Federal Reserve of New York spoke today and said, “monetary policy has been effective in restoring balance to the economy and bringing down inflation on a path to 2%.” Mary Daly, The Federal Reserve of San Francisco spoke with the Journal and said “the perception is what matters more than the numbers at times. If individuals are not concerned about losing their jobs and the cost of goods and services with inflation the objective is being achieved.”
Trump Tariff
Paul Donovan, UBS Chief Economist said “if Trump implements the universal tariff being proposed by the Trump Campaign it will be a tax on US Consumers which will raise price levels. A universal tariff we have not had since 1971.”
As a reminder a tariff is applied to goods at the port only. It is estimated that the price of goods at the port is about 40% of the goods in the store. Where are the other costs? From the port to the store, you have the wholesaler, retailer, transportation and advertising costs.
Since trade policy comes under the presidents and does not need congress to implement. After the formal process, the Trump Campaign could implement the Tariff Proposal without congress.
Paul Donovan said “Trump’s first term he went with selective Tariff’s against China which have been easy to avoid with rerouting the supply chain. China sends the goods to Canada and then it is repackaged as an export from Canada to the US. Supply chain structures are changing with localization, digitization, automation and robotics. Meaning the complex supply chains that we have are becoming simpler as more is made locally.”
As always, please do not hesitate to contact Sage Financial Investments for a Free Strategy Review or Second Opinion to discuss your portfolio or re-visit your risk profile.
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