The September tug of war for markets sees the bears win (so far). But those focused on rate cuts and the future, buy the dip
The September tug of war for markets is seeing the bears win so far, with traders de-risking ahead of the Federal Reserve's rate decision. Growth sectors like semiconductors and copper are being hit hardest, as uncertainty looms over whether the Fed will cut rates by 0.25% or 0.5%. However, optimists focused on future rate cuts are buying the dip, targeting sectors like real estate and building materials. On the ASX, property and AI stocks are gaining, as calls get louder for the RBA to cut rates next year, while iron ore and coal companies face selling pressure.
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Many traders are continuing to heavily de-risk and take profits off the table ahead of next week’s Federal Reserve rate decision (Sept 19), with the market unsure if the Fed could cut rates by 0.25% or 0.5%.The August jobs report showed the US economy might need extra Fed support, with the economy slowing quicker than expected. Markets don't like that uncertainty, so growth sectors and industries have been seeing further selling pressures, with semiconductors and copper names among the hardest hit.
Meanwhile, optimists and equity market bulls remain focused on the long-term story, knowing that markets have always recovered from a pullback. Markets don't go up in a straight line. Many investors are looking forward to Fed rate cuts acting as a tailwind for markets. Some investors have been buying into sectors that could benefit from Fed interest rate cuts, such as real estate, building materials, timber, airlines, and restaurants.
S&P500 over the last five trading days.
On the ASX, similar trends are playing out. Over the last five trading sessions, investors have been buying into sectors that could benefit from potential local rate cuts, after the RBC now sees the RBA making its first interest rate cut in February, instead of May next year. Property groups like Charter Hall $CHC, Mirvac $MGR, and Dexus $DXS are higher and we've seen buying into AI beneficiaries such as NEXTDC $nxt Meanwhile, selling pressure continues in iron ore and coal companies, such as Mineral Resources $MIN and Coronado Global $CRN, which are down 22% each over five days.
ASX200 over the last five trading days, including Monday.
So far this September, as is seasonally typical, the bears are winning. Last week, US stocks suffered their worst pullback since March 2023, with the S&P 500 down 4.3%. But guess what Australia's market only fell 0.97%, its biggest weekly drop since the August flash sell-off. I think long-term investors may become dip buyers or bottom feeders this week, starting to nibble into stocks at these levels, remembering that markets usually stage a recovery in October, before strongly bounding up in November
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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