I'm Dan Sheehan, a wealth advisor / financial planner based in Charlotte, NC. I work with high earners, families, and business owners on the things that actually move the needle over a lifetime: building the plan, managing the portfolio, and getting the tax picture right. Most of my clients came to me knowing they were doing well but suspecting they were leaving something on the table. Usually they were. This newsletter is where I share the thinking behind that work, one topic at a time.
Good morning investors,
This is my 500th edition of this newsletter and I couldn't be more grateful for every reader, whether it is your first, or 500th for some!
August is set to close out as a strong month despite the constant noise we have had to deal with. The S&P is up about 3% on the month and the Nasdaq 4%, both their first monthly gains since May, with the Dow up 2.1% for a fifth straight advance. Tech carried the rally with the sector up nearly 6%, Nvidia more than 8%, Micron 13%. Both the S&P and Dow hit records along the way. Not bad for a month that also handed us multi-decade highs in bond yields and a hawkish turn from the Fed.
The mood this morning is different after the US and Iran resumed striking each other over the weekend for the first time in a month, with US forces hitting rocket launchers on Iran's Larak Island and Tehran reportedly retaliating against US bases in Jordan. Oil jumped, WTI up more than 3% to $86 and Brent past $91. Short term government yields hit multi-year highs across Europe and Japan on the renewed inflation worry. It's a fitting start to a month I've been flagging as the trickier one.
September Is Set Up to Be Bumpy
I wrote a few weeks ago that I expected August to hold up and September to be the harder month, and the setup going in supports that. This is historically the weakest month of the year, and now it arrives with real headlines to go with the seasonal odds. We have a September rate hike sitting at roughly a coin toss, questions about how the market handles it if it comes, the US and Iran striking each other again, and a creeping worry about buying stocks at what may be the peak of earnings expectations. Any one of them is manageable for the market but together they make for a month that could be a good deal choppier than the calm we've had.
We're about where we were three weeks ago, and the S&P hasn't had a 1% or great pullback in a while. A market that hasn't dropped in some time, sitting near record highs, heading into its historically weakest stretch with live geopolitical and rate risk is one where I'd expect more movement in both directions. None of this means September has to be a down month. My read is simply that it's likely to be a more volatile one, and I'd rather set that expectation now than react to it later.
The seasonal numbers are worth knowing, and Ryan Detrick, CMT laid them out well. Since 1950, September has been the worst month for stocks, and that holds over the past 10 and 20 years too. The S&P has finished September higher only 45% of the time, the lowest of any month, with an average loss of 0.6%. In midterm years it's mixed, ranking tenth worst, with only January and June worse. There's a wrinkle that cuts against the gloom, though, and it's one Detrick makes. The worst Septembers have usually come when the market was already weak heading into the month. Years like 1974, 2002, and 2022 were struggling before September arrived. We aren't. We're coming in near highs with strong earnings behind us, which isn't the profile that has historically produced the ugly months. So I hold the seasonal caution without treating it as a forecast of a decline.
You should definitely check out Ryan's twitter account if you don't follow already. Some incredible stats.
Warsh Leans Hawkish
Warsh's Jackson Hole speech Friday gave the market more than most expected, and I would say landed on the hawkish side of things. He defended the Fed's new habit of keeping its intentions quiet, so there was no forward guidance, but he made three things clear. He's watching a range of inflation measures with PCE featured prominently, he agrees with the rest of the committee that inflation is too high, and he doesn't see current policy as particularly restrictive. That last point is the one that moved things, because it implies rates could go up rather than down.
The bond market repriced quickly and the odds of a September hike jumped to around 60% right after the speech, up from 35% the day before, though that's still close to a coin flip. Not everyone reads it as a done deal with BlackRock's Rick Rieder calling the speech rightly hawkish while doubting it forces a September move, especially with more jobs and inflation data still to come before the meeting. Barclays went the other way, seeing a hike as more likely than not now, with another possible in December. Long yields got no relief, partly because Warsh said nothing about the debt and deficits that have been driving them. The 10-year is back above 4.7%. The bond problem I keep coming back to isn't going anywhere, and a hawkish Fed that stays quiet on the fiscal picture doesn't ease it.
Friday's Jobs Report
Friday's payrolls are the main event this week, and with the Fed's decision only a couple of weeks out, the report could matter a little bit more this week. Expectations are modest, something like 58,000 jobs after July's contraction, with unemployment holding around 4.1%. ING is looking for a similarly soft recovery near 65,000 and expects the low-hire, low-fire pattern to persist through the year, with tariff caution and higher borrowing costs keeping companies cautious.
The report has become an odd gauge to read as it shows a labor market that's still creating jobs, but with a falling participation rate underneath that may reflect people giving up amid the lack of hiring. For the Fed, a hot number would hand ammunition to the officials who want to hike but worry about the cost, while a soft one complicates the case for tightening into a slowing job market. Either way, it's the most important data point of the week and the last major labor read before the September meeting.
Final Thought
We're entering a more volatile stretch. September's seasonal weakness, a coin toss rate hike, renewed fighting with Iran pushing oil and inflation the wrong way, and a market sitting near highs after a long stretch without a pullback. That's a setup for more movement, not a reason to head for the exits.
The long term case hasn't changed, and it's worth holding onto through a bumpy month. Earnings carried this market all year, with Q3 growth projected around 23%, and stocks have historically done well in real terms even with inflation above 3%. The S&P beat inflation in all but four of the last twenty years. I'd treat any pullback as the opportunity it usually turns out to be rather than something to run from, especially since we haven't had one worth the name in a while. I keep the closest watch on the 10-year and that 5% level, since Warsh gave the long end no relief and the fiscal picture behind it is untouched.
Best regards,
Dan Sheehan [email protected]
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Market Pulse with Dan Sheehan is a personal market commentary newsletter and is independent from my employer. The content is provided for informational and educational purposes only and reflects my views as of the publication date, which may change without notice. Nothing contained herein should be construed as personalized investment, legal, tax, or financial advice, or as a recommendation to buy or sell any security. Any positions discussed represent my own views and may not be suitable for every reader's objectives, financial situation, or risk tolerance. Information is derived from publicly available sources believed to be reliable, but accuracy and completeness cannot be guaranteed. Readers should conduct their own research and consult their own professional advisers before making financial decisions.