Good Afternoon, Happy Labor Day! I hope this note finds you enjoying some fine cuisine fresh off the grill! Well here we are starting a new month. The dreaded month of September. The weakest month for the stock market since the 20’s and here we are 100% invested in equities. What gives? First of all that seasonal thing is indeed correct most of the time, but what if this is not most of the time? Lets go over a few facts here as to why this September could be one of the few that indeed shows a gain. To understand this fully you’ve got to go back to the Pandemic and the quantitative easing that the government put in place to prop up the economy. As we all know and as we have discussed many times, that stimulus ultimately led to inflation which resulted in the government transitioning from quantitative easing to quantitative tightening which included such things as raising interest rates and selling bonds and mortgage based securities (accumulated during the quantitative easing). Some months ago the Federal Reserve decided it was time to again reduce rates as the rate of inflation was beginning to slow. The policy of reducing rates was going along fine and the market was loving it until President Trump enacted several tariffs which caused the Fed to pause their rate decreases. Which brings us to where we are now at the beginning of September. It is widely anticipated  that the Fed will once again begin to lower rates. The m0st recent economic and labor reports support that assumption. Two weeks ago the department of labor’s jobs report came in soft. As you all should know, the Fed has a dual mandate to support employment and control inflation. This convinced market players that the Fed would be forced to cut rates to support the job market even though inflation may not be moderating enough to make them comfortable. Then this past Friday we had the Feds favorite inflation gauge, the personal consumer expenditure report or PCE which showed continued inflation moderation. The personal consumption expenditures price index rose 2.6% in July on a year-over-year basis, matching a Dow Jones estimate of what economists were expecting. Core PCE, which strips out volatile food and energy prices, rose 2.9% year over year. Stocks have been riding high recently, largely due to expectations that the Federal Reserve will begin another rate-cutting cycle this month. The S&P 500 hit a record on Thursday, closing above 6,500 for the first time. “There is nothing in today’s inflation report to stop the Fed from delivering a rate cut at the September meeting and that has to be a relief for the highly-criticized members of the FOMC,” wrote Chris Rupkey, chief economist at FWD Bonds, referring to the policy-setting Federal Open Market Committee. Traders are pricing in an 87.2% probability of a quarter percentage point rate cut, according to the CME Group’s FedWatch tool. The Fed’s current benchmark rate stands at 4.25% to 4.50%. Okay that all sounds good, but not so fast on that rate decrease. The PCE was not without controversy. Friday’s numbers weren’t perfect. Core PCE, while in line with estimates, marked an acceleration from June —  when prices increased 2.8%. “Inflation continues to rise, which may complicate things for the Fed down the road,” Bret Kenwell, U.S. investment analyst at eToro, said in an email. The outlook becomes murkier when looking into October and December. “While the Fed will likely cut rates to accommodate the labor market, it may be hard for them to move as quickly or aggressively as they’d like with inflation moving higher,” Kenwell said. Investors will get new clues on the state of the labor market next week, when the Bureau of Labor Statistics releases the August U.S. jobs report. Alright! That brings us down to two events that will determine whether we go boom or bust. Fridays Jobs report and the Fed meeting which occurs on September 16th and 17th. You can bet on one thing for sure. The market will move in a big way between 2:00 PM and 3:00PM ET on September 17th. There will also be a significant move one way or the other after Fridays jobs report. If that report comes in soft the market will likely rally through the New Year. If not, the jury will be out on a rate decrease….. a hot August jobs report could very well convince the Fed to hold off on a rate decrease until November and that would be a big negative for the market. So mark those dates down on your calendar. I have always felt that the next decrease would be in September or November. Which of those it will be comes down to the August jobs rep0rt………

Fridays trading left us with the following results: Our TSP allotment spent the day in the red closing at -0.61%. For comparison, the Dow dropped -0.15%, the Nasdaq -1.15%, and the S&P 500 -0.60%.

Stocks close lower, but S&P 500 notches its 4th winning month in a row

Last weeks action left us with the following signals: C-Buy, S-Buy, I-Hold, F-Buy. We are currently invested at 100/S.  Our allocation is now +15.28% for the year. Please remember, if you are following the auto tracker that we missed a trade there due to inclement weather. So you must add 4.5% to that figure to get the correct return. Here are the latest posted results:

God bless, Scott 

***Just a reminder that you can review the performance of our allocation at the Web Site TSPTALK.com in the autotracker section under the screen name KyFan1.

I produce and publish this blog as both a ministry and for the benefit of any Federal Government Employee. This is done to offer you some guidance as to how to approach your retirement more financially successful. When it is time for you to retire, I recommend you utilize the services of a Professional Money Manager, who works with a reputable investment firm. He understands the guidance you have already received and he can manage your savings assets utilizing a more advanced investment program into the future.

If you would like to receive more information about this introduction, please feel free to contact me at  KyFan1@aol.com.