I hope that you enjoyed the long Labor Day weekend!
Despite the three-day break, it appears that Wall Street is still digesting the disappointing jobs report from Friday. The S&P 500 and Dow Jones Industrial Average both opened lower this morning, while the NASDAQ Composite and Russell 2000 Index were relatively flat.
Specifically, the Labor Department revealed that only 235,000 payroll jobs were created in August. In comparison, economists were expecting 720,000 new payroll jobs, so that was a massive miss. The unemployment rate still declined to 5.2% in August, down from 5.4% in July. The dip was largely due to the fact that the number of folks looking for jobs declined. The good news is that June’s and July’s payroll reports were revised higher, and I suspect that the August payroll report will also be revised higher in the upcoming months.
Interestingly, the Labor Department and ADP have been out of sync for the past few months, but they grew a bit closer in August. ADP reported last week that 374,000 private payroll jobs were created last month. That was also a big disappointment, since economists were looking for 600,000 private jobs. Now, despite the rising COVID-19 fears, 201,000 jobs were created in leisure and hospitality.
Unlike the ADP report, the Labor Department did not show any jobs created in leisure and hospitality in August. In fact, bars & restaurants lost 42,000 payroll jobs in August, while retailers lost 29,000 payroll jobs. I should also add education jobs creation was insignificant even though most kids are going back to in-person school. The truth of the matter is that the U.S. economy has lost 5.3 million jobs since the pandemic commenced, and there is now an acute labor shortage.
The labor shortage is weighing heavily on the Federal Reserve’s mind, and it is the main reason why the Fed hasn’t taken steps to curb rising inflation. In the wake of the August payroll report, the Fed’s Federal Open Market Committee (FOMC) statement on September 22 will be more important than ever. I suspect the FOMC will likely continue to use the COVID-19 Delta variant as an excuse to kick the can down the road and defer any tapering announcement.
The fact that the Fed is failing in its unemployment mandate and hasn’t been able to replace the 5.3 million jobs lost during the pandemic likely irritates the doves of the FOMC. The hawks, on the other hand, are alarmed over higher inflation and know that the Fed cannot fight market rates long term.
Overall, the September FOMC statement will be closely scrutinized. Personally, I still don’t look for the Fed to make any adjustments to its quantitative easing and key interest rate policy until 2022. As a result, the “Goldilocks” environment of ultralow interest rates, an accommodative central bank and robust economic growth will persist and should continue to support higher stock prices this month.
The Weakest Month of the Year for the Stock Market
With that said, I should add that September tends to be the weakest month of the year for the stock market, so it likely won’t be a straight ride up for stocks. According to Standard & Poor’s and Haver Analytics, the S&P 500 has declined an average 1.0% in September between 1928 and 2021. The analysts at Bespoke also recently reported that the Dow has posted negative gains on average in September over the past 100, 50 and 20 years. So, we might be on the verge of another bumpy month.
The good news is that much of the stock market’s weakness occurs at the beginning of September. The reality is that liquidity tends to improve around mid-month when folks in Europe and on Wall Street return from their extended summer vacations. Stocks tend to firm up just in time for the fourth quarter.
So, why exactly does the stock market often rally at the end of September? Simply put, quarter-end window dressing and the 90-day ETF rebalancing.
Typically, in the final 10 days of the third quarter, institutional investors look to shore up their clients’ portfolios. They attempt to make the portfolios “prettier” by selling stocks with lackluster quarterly results and buying stocks with superior fundamentals. Smart Beta and equally weighted ETFs will also rebalance ahead of the quarter’s end. It’s a one-two punch of “forced” institutional buying pressure that tends to drive fundamentally superior stocks higher.
I fully expect my Platinum Growth Club Model Portfolio to experience this one-two punch, as they represent the crème de la crème — with at least double-digit forecasted earnings and sales growth — my stocks often benefit from the “forced” institutional buying pressure at the end of the quarter and trek higher. I suspect that will be the case this time around, too.
The reality is that my Platinum Growth Club Model Portfolio stocks remain characterized by superior fundamentals at a time when earnings momentum is slowing down for a lot of S&P 500 companies. This includes the five new stocks with accelerating earnings momentum and robust buying pressure I added in my Platinum Growth Club September Monthly Issue, published last Wednesday. ( Click here now for my full recommendations.)
I’ve also recommended a host of new stocks (and LEAPS call options, or Long-Term Equity Anticipation Securities) in the past few days. Today, I added two new high-quality stocks in Accelerated Profits, four stocks in my Breakthrough Stocks Monthly Issue and one LEAPS call options trade in my Power Options service last Thursday, as well as four stocks in my Growth Investor Monthly Issue for September in late August — all of which my Platinum Growth Club subscribers have full access to.
All told, I have more than 100 stocks across all of my services across all of my services and more than 50 LEAPS call options, and each and every one boasts strong sales and earnings growth. Of course, you don’t have to invest in all 100-plus stocks. If you’d rather start small, I’ve got you covered there, too. My Platinum Growth Club service comes with my exclusive Model Portfolio.
As I discussed, these stocks represent the crème de la crème. I handpick all of my Model Portfolio recommendations from my different stock services — Growth Investor, Breakthrough Stocks and Accelerated Profits — so you can rest assured that you’re investing in the best of the best.
The truth of the matter is you couldn’t be joining at a better time. In addition to having instant access to every recommendation, Weekly Update, Monthly Issue, Trade Alert and Market Alert I’ve issued, you’ll also be signing up just in time for my Platinum Growth Club Live Chat event for September, which I will be holding next Monday, September 13, at 12 p.m.
I will be covering a wide range of topics, including my latest thoughts on the market, updates on several Platinum Growth Club Model Portfolio stocks and much, much more. Plus, I will take Platinum Growth Club subscriber questions live at the end of the event, and those who send me questions early will get to jump ahead of the line. So, if you have any questions, sign up now and send them over!
The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:
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