Market Update & Review

The market took a hit this week once again as the summer weakness continued. While many attributed the decline in stocks and rise in bond yields to the recent Fed projections of "higher for longer," the action this week seemed more akin to end-of-the-quarter rebalancing for fund managers. Furthermore, September 30th marked the fiscal year-end for about 20% of fund managers who needed to make distributions and redemptions. Nonetheless, the market declined this week, with only minor support holding the market in place.

The market held support at the 150-DMA, which is acting as minor support. A violation of that level will see the markets quickly test the 200-DMA. If this market will maintain its bullish footing, it must hold support and begin to firm up next week.

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As we stated last week:

"While there was much handwringing and teeth-gnashing over the decline, it was normal within any given year. As we noted in June: "Notably, in any given year, bullish or bearish, a 5-10% correction is entirely normal and healthy. Such corrective actions are opportunities to increase portfolio equity risk."

As we will discuss in today's commentary, the decline was expected and, so far, has remained confined to expectations. Given the reduction in asset prices, a drop in bullish sentiment, and technically oversold conditions, the summer weakness has set the markets up for a potential year-end rally.

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