Last month, I identified several issues that could shake up the markets this fall, and they’ve been shaking them. However, new issues have also emerged. Entering September, the stock market was on a seven-month winning streak and had achieved new record highs as recently as mid-August. Then volatility began to spike around Labor Day, and September saw all three major indexes finish down for the month for the first time since January. This included the S&P 500 down by 4.8%, the Dow by 4.4% and the Nasdaq by 5.4%.* There were several factors behind the pullback, most of which could continue weighing on the markets for the rest of the year. Here’s a rundown:
All Eyes on the Fed
Still More ‘Skeletons’
So, what does all this mean for income investors? Well, for one thing, it means some of you may see a slight drop in the value of certain bonds and bond-like instruments on your September statements due to the interest rate spike. It should, however, be much less than the drop you saw early this year when rates spiked much higher, no more than a half-to-one percent for most of you. More importantly, it doesn’t affect your income return at all.
That, of course, is the main thing to remember if the markets remain volatile the rest of the year, or even experience a significant correction, which many believe is possible thanks to all these skeletons in our geopolitical closet. Some are speculating it could be as steep as 20%, but I believe 10% is more likely. In either case, a pullback in that range could create a great buying opportunity for income investors with the right income-based stock strategies, especially since the market is expected to strengthen again next year. It could also be an opportunity for others to reassess their risk tolerance and possibly get into a dividend-yielding stock strategy. Either way, this fall looks poised to offer yet another good example of how investing for income is a sound strategy in all market conditions!
*“Stock Futures Trade Sideways After September Slump,” Yahoo Finance, October 1, 2021.
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