The Gold Update: No. 773 – (07 September 2024) – “Gold Stodgy; Stocks Dodgy”

‘Course, the Buck’s upside pluck into September 2022 per the above weekly chart clearly came in tandem with the Fed raising its Funds Rate.  But now that the Open Market Committee per its 18 September Policy Statement shall initially reduce said rate by -0.250%, the bang for the Buck is starting to wane.  Yes, the nattering nabobs of Gold negativism love to swiftly point out that the yellow metal offers no yield.  But given Gold’s aforementioned undervaluation of -32%, that “catch-up yield” by price alone looks excellent to us.

Meanwhile “catching-down” (if you will) is the “dodgy” stock market.  ‘Tis always entertaining to read the FinMedia freak-out whenever the market puts in even just a pimple of a correction.  “S&P 500 tumbles Friday to post worst week since 2023” trembles CNBS, (our being more precise, since that ending 11 March 2023).  True, the S&P’s net loss for the past week was -4.2%.  But let’s put that in context:

• from the year 2000-to-date — through the DotComBomb, FinCrisis, and CrazyCovid — this past week’s net loss for the S&P 500 was its 54th worst across those 1,288 weeks.  “Oh dear!”

Hardly ho-hum, but the fear elicited through the FinMedia was both formidable and (for us) fun.  And it shows just how complacent have become the “youngsters” of modern-day Wall Street.  Let’s again reprise BTO from ’74 with “You Ain’t Seen Nothing Yet” 

“Well, it is September, mmb…”

So ’tis, Squire, and yes, across the 54 years from 1970 through 2023, by average net monthly percentage change, September does rank as the year’s worst month for the S&P 500, followed by February; the best two months are April (surprise!) and November.  (The once highly-vaunted month for the “January effect” ranks fourth-best of the 12 all told).

But in support of Squire’s point, September is the notorious month of so-called tax-loss selling season and fiscal year-end for many a mutual fund.

Yet today, the S&P 500 more broadly refuses to be severely shaken.  The ongoing “out-of-sight, out-of-mind” level of our “live” S&P 500 price/earnings ratio eternally living in the 30s and 40s remains inanely uncanny.  Again remindful of one J. B. Cohen:  “…in bull markets the average [P/E] level would be about 15 to 18 times earnings.”  However:  that for the summation of the 503 S&P constituents settled yesterday at 38.2x (price ÷ trailing twelve-month earnings x market cap weighting, with earning-less stocks ascribed a P/E of their stock price).

‘Course the culprit supporting it all is the $7T COVID monetary injection essentially (as we’ve mathematically proven) having ended up in the stock market.  And ’tis still there, refusing to go anywhere:  thus the bubble.  Risk-free debt is boring and doesn’t work well in showing off at cocktail parties.  As for all those talking marked-to-market millionaires … one day they’ll morph into head-hanging thousandaires.  ‘Tis only fair … but beware:  the next P/E means reversion shan’t be a happy excursion.

However, fairing a bit better of late is the Economic Barometer.  In just the past holiday-shortened StateSide week, of the 13 incoming metrics for the Econ Baro, nine improved period-over-period, the notable standouts being July’s Factory Orders, Q2’s revision to Productivity, and for August both Hourly Earnings and The Institute of Supply Management’s Services Index.

Noted however, was the really rotten ADP read on August’s Employment:  for the past post-COVID 36 months, the average monthly jobs gain had been 278,000; this time ’round the number was just 99,000, some -34% below consensus, not to mention the July reading being revised lower as well.  But “Labor’s” number (dare we say “of course”) improved, as on balance did the Baro: