Stocks are on track to record their second consecutive month of losses, a trend not seen since September 2022. The Nasdaq, S&P 500, and Dow are all experiencing negative monthly performances. The Nasdaq is down 5.9% in September, which could be its worst monthly performance since December 2022 when it fell 8.73%. The S&P 500 is down 4.6% this month, on pace for its worst monthly performance since December 2022 as well. The Dow is down about 3%, set for its worst monthly performance since May. The decline in stock prices is concerning and suggests a potential economic and stock outlook downturn.
According to investment firm Grantham Mayo Van Otterloo (GMO), inflationary pressures are expected to rise, indicating a need for higher real interest rates to control inflation. However, higher interest rates pose a risk to expensive and leveraged assets, including stocks. GMO suggests that investors should prepare for a recession not by reducing risk but by seeking out investments where they are well-compensated for risk, indicating a shift towards safer assets. One area of concern is the increased interest burden on corporate borrowers, as illustrated by the rising interest on Business Development Corporations. The concentrated bet on these borrowers’ ability to avoid defaults may be too large given the current economic climate.
In after-hours trading, several companies made significant moves. Vail Resorts, a ski resort chain, saw its shares slide after a disappointing quarterly report. Nike, on the other hand, experienced a rise in shares after reporting better-than-expected earnings in the first quarter. Blackberry’s shares also increased following a second-quarter loss that was smaller than analysts predicted. These fluctuations in stock prices reflect the ongoing volatility and uncertainty in the market.
