Welcome Investors!

Here’s your Alpha portfolio update for September 2024:

• Returns so far this year +7.63%

• Our leading stock is SM Energy Co currently at +11.5% while our position in DRDGOLD lags by -15%.

• We have 5 new stock positions and 7 stocks sold.

• Total positions: 13
  _{See the investment portfolio for the rest of our positions.}

The selling started on day one. On day three, a weakening US jobs market sparked concerns over a possible recession, and a popular hedge fund trade linked to the Japanese yen blew up.

The S&P 500 lost 3% and the Dow plunged more than 1,000 points - its worst sell-off in two years.

Within the first three trading days of August, the Nasdaq had entered correction mode (down 10%). Apple was down 12%. Tech bellwether Nvidia was crashing more than 20%.

The roller coaster train had disengaged from the lift and down we were going, gravity at its most terrifying.

It wasn’t supposed to be like this. But we anticipated high volatility through summer.

Here’s the thing about roller coasters. After all the screaming, you tend to end up pretty much back where you started. Once the so-called yen “carry trade” was properly analysed and deemed not to be a threat to the overall market, and once additional employment and inflation data largely alleviated recession fears, buyers came back in. Two weeks into the month, and we were right back to where it all began.

"What we saw (on Aug. 5) was a unique confluence of events," said Steve Sosnick, chief strategist at Interactive Brokers. "I think it's also quite remarkable how quickly everyone reverted to the same playbook that has been working for them once it was established that those events appear to be temporary."

It’s enough to give you whiplash. And a reminder of why I no longer ride coasters.

We Still Had Two Big Events to Get Through in August.

Fed Speak at Jackson Hole, Wyoming - Check.

On August 23, Federal Reserve Chair Jerome Powell delivered an absolutely clear message to financial markets: “The time has come for interest rate cuts.” It’s a moment Powell had been warming up to for months. Powell left his options open as to whether he will start with 25 or 50 basis points (0.25% or 0.50%), but cuts are coming beginning in September. Markets reacted positively.

Nvidia’s Quarterly Earnings Report - Check.

This was all the talk for days leading up to the report. If they missed, there was the fear of a whole-market collapse. Or at least the collapse of the AI trade – which had undergirded the market for the entire year. If they beat, as Wedbush’s Dan Ives believed, it would herald in “the beginning of the next bull market.”

What happened? On August 28, they reported a beat – but not as much as the high-expectation “whisper” numbers. And they guided up – but not so much as to satisfy some investors. The next day, the stock sank 6% and change, bringing the price down to levels not seen since… 10 days prior.

Now, anything can happen in the next few days, but I think it’s telling that the market didn’t collapse. The S&P 500 closed flat and the Nasdaq only slightly down. AI movers and shakers Apple, Microsoft, Meta and others, were green for the day. Many of the other chip names held their own, as well.

And life goes on.

How is September Shaping Up?

• With a rate cut by the Fed appearing all but guaranteed in September, “good news is good again, supporting soft-landing forecasts,” says Morgan Stanley.

• SoFi’s Liz Young Thomas agrees. “The data right now suggests that positivity is warranted.” But she goes on to caution: “What we learned a couple of weeks ago is that the market is not bulletproof. We have to remember that the Fed is cutting into a weakening economy, and it can get dicey.”

• “A neck-and-neck race between former President Donald Trump and Vice President Kamala Harris means additional uncertainty for investors ahead of the Nov. 5 U.S. presidential election,” says Chase Investment Counsel President Peter Tuz. “As well, turmoil in the Middle East and uncertainty over how many interest rate cuts the Fed will deliver make it particularly difficult right now to forecast the stock market.”

I forecast turbulence. Keep your seatbelt fastened.

And with that, have a great September!

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Ali is the Founder & Editor of The Insider Memo, Follow him on X @ASAInsights