The stock market is in an odd place right now. This month, it has fallen in the majority of trading sessions. This month, the S&P 500 (SPX), the broadest measure of the US stock market, has only four higher closes, one of which was more or less flat. Meanwhile, the Fear & Greed Index is at 35, indicating that people are afraid.
Another day of losses came on Friday. The Dow Jones Industrial Average (INDU) fell 0.5 percent, or 166 points, while the S&P 500 (SPX) and Nasdaq Composite (COMP) both fell 0.9 percent.
Clearly, investors are nervous. In the grand scheme of things, however, stocks are still near record highs. The S&P 500 is only about 2% below its all-time high.
The market is in a holding pattern. Many speculated that the Federal Reserve would announce a reduction in its emergency stimulus next week. However, following a disappointing August jobs report, this appears to be less likely.
Price stability and maximum employment are the Fed’s two mandates. And, given last month’s job growth shortfall, the latter is far from certain.
Meanwhile, inflation appears to be slowing: according to data released earlier this week, consumer price inflation fell from a 13-year high in August.
While the Delta variant has hampered job growth, other economic indicators have performed admirably: This week’s retail sales were better than expected, increasing rather than decreasing. These are positive signs for consumer spending, which is the backbone of the US economy, and could mean better marks for economic activity in the second half of the year, along with the slower increase in prices.
According to preliminary data released Friday by the University of Michigan, consumer sentiment is improving again after plummeting in August due to Delta concerns.
“The steep August falloff in consumer sentiment ended in early September, but the small gain still meant that consumers expected the least favorable economic prospects in more than a decade,” said Richard Curtin, chief economist at the Surveys of Consumers.
Another blemish on the report: consumer attitudes toward durable household goods, such as refrigerators and air conditioners, have dropped to their lowest level since 1980.
There are a lot of moving parts, and with so much in limbo, Wall Street is understandably concerned — but not excessively so.
It’s a lot to take in: the recovery is in an odd place, people are worried about what the winter will bring in terms of the pandemic, and stock market valuations are high in a market that lacks a clear driver right now. However, according to experts, the best thing you can do is keep your money invested.
