Stocks are on track to have their second consecutive negative month, marking the first time this has happened since September 2022. The three major indexes, including the Nasdaq, S&P 500, and Dow, have all seen declines in September. The Nasdaq is down 5.9%, the S&P 500 is down 4.6%, and the Dow is down about 3%. These performances are the worst since late 2022 and May, respectively. The negative trend in stocks may signal a challenging economic and stock market outlook, according to Grantham, Mayo, Van Otterloo. The investment firm believes that higher inflationary pressures will require higher real interest rates, which could put pressure on expensive and leveraged assets. They advise investors to focus on owning risk where they are well-compensated for it.
Inflationary pressures are expected to be higher in the future, leading to the need for higher real interest rates to combat inflation. However, this poses a challenge for stocks as higher rates put pressure on expensive and leveraged assets. Grantham, Mayo, Van Otterloo suggests that investors should prepare for a potential recession by owning risk in areas where they are adequately rewarded for taking it. The firm also highlights the increased interest burden on corporate borrowers, pointing to the increased interest percentage of portfolios in Business Development Corporations. While the yields might seem exciting, they caution against overly concentrated bets on defaults not occurring.
In after-hours trading, Vail Resorts saw a decline in shares following a disappointing quarterly report, reporting a loss per share and lower-than-expected revenue. On the other hand, Nike’s shares rose after reporting an earnings beat, despite the revenue falling below estimates. Blackberry also saw a slight increase in after-hours trading following a loss per share that beat analysts’ expectations but fell short on revenue. These notable moves in after-hours trading could influence market dynamics in the coming days.