After a triumphant surge between May and July, the U.S. equity markets have hit a rough patch, leaving investors on a rollercoaster ride. Initially, stocks tumbled due to the unwinding of the Japanese “Yen Carry” trade. Subsequently, tech stocks were discarded following Nvidia’s first margin contraction in a long while. Yet, hopes were rekindled after Nvidia’s CEO, Jensen Huang, allayed fears of slowing demand. In a parallel declaration, Oracle’s CEO, Larry Ellison, resonated the positive demand sentiment, creating waves by revealing that both him and Tesla’s CEO, Elon Musk, urged Huang to accept their funds for more AI GPUs.
In the midst of the ongoing market turmoil, what lies ahead on the path for stocks?
3 Causes Likely to Spark Short-term Turbulence
The September Slump in Seasonality
Historically, Goldman Sachs research indicates that the latter part of September has been plagued by dismal returns, with ten out of the last eleven days of the month yielding negative returns since 1950.
Image Source: Goldman Sachs
The Federal Reserve (FOMC) Conundrum
September’s pivotal event, the FOMC interest-rate decision, is slated for 2:00 pm EST, followed by Fed Chair Jerome Powell’s press conference at 2:30 pm. Powell confirmed the Fed’s inclination towards the first interest rate cut since 2020, citing easing inflation and a decelerating U.S. job market as catalysts. However, uncertainty shrouds the extent of the rate cut, with market expectations wavering from a projected 25-bps to a ~60% probability of a 50-bps slash. In a surprising twist, Senator Elizabeth Warren pushes for a hefty 0.75% cut, though this move seems far-fetched. The impending announcement may herald a “Sell the news” scenario, regardless of the cut magnitude.
The Triple-Witching Phenomenon
Triple witching, where stock options, stock index futures, and stock index options expire concurrently, is a quarterly event stirring up short-term market volatility. This quarter’s triple witching event is scheduled for Friday, September 20th. Traders and investors face intensified decision-making pressure as they navigate expiring positions during this period.
The Verdict
After a week of resurgent stock prices, investors need to brace themselves for potential turbulence as unfavorable seasonality, the impending interest rate decision, and the looming triple-witching expiration cast shadows on the near-term market outlook.
5 Stocks Poised for Doubling
As highlighted by a Zacks expert, these stocks are primed to soar by +100% or more in 2024. While not every pick strikes gold, previous recommendations have skyrocketed by +143.0%, +175.9%, +498.3%, and +673.0%. Most of these stocks are under Wall Street’s radar, presenting a lucrative opportunity for early entry.
Don’t Miss out on These 5 Potential Winners >>
Wish to access Zacks Investment Research’s freshest recommendations? Dive into the world of 5 Stocks Set to Double today. Click to get this report for free.
Read the Full Article on Zacks.com
The thoughts expressed are those of the author and not necessarily those of Nasdaq, Inc.
