Welcome to September. A month in which seasonality works against us. Ranking historically as the worst month of the year for equity performance. In fact, September stands as the only month that, since 1928, has seen more negative than positive returns. Further distinguishing itself by posting the largest average monthly loss over that time frame.
September is to stocks what playoff games are to the Bengals. Historically losing affairs.
If last week offered any evidence, this year shall be no different. Every session last week finished lower. Pushing the Nasdaq 100 down 2.5 percent. The S&P 500 down one percent. And the Russell 2000 down 1.6 percent. Notably, it was the worst start to September for the Nasdaq since 2008. Which was the worst September in my memory.

As tough as September's start was for U.S. stocks, things fared worse overseas. Australia sank 4.6 percent and is now -5.7 percent on the year. Hong Kong fell 4.6 percent and sits -7.9 percent year to date. Russia fell 4.2 percent, down -9.5 percent this year.
The worst major U.S. index last week? The Nasdaq 100 (QQQ). Down -2.9 percent. Though it is still +16.7 percent YTD. The best performing index was SPDR Dow Jones Industrials (DIA), down -0.1 last week. But still +6.3 percent YTD.
With Q2 earnings season concluded, the S&P 500 managed to establish a new all-time high. Hitting 2,914 on August 29th. The index is up 6.52 percent year to date. Concurrently, the foreign equity index (MSCI EAFE) has lost 7.1 percent. While the aggregate bond index has fallen -1.14 percent. Bringing the return on a "moderate-risk, globally balanced" portfolio to a -1.14 percent loss YTD.
Overall, Q2 earnings were excellent. With earnings per share increasing by 25 percent year over year. The fastest growth rate since Q3 2010. Moreover, 80 percent of companies beat analyst estimates. While revenues expanded 10.1 percent year over year.
Which would make any September volatility spike feel even even more caustic.
Should we not expect fireworks, however? Following the quietest August the markets have seen in 50 years. During which investors ignored trade tensions, emerging-market currency weakness, political drama, and the probability of more Fed interest rate hikes. Something had to wake investors from their slumber. Expect September to accomplish that.
Of course, what's a little volatility spike in the big picture? Especially after the last nine years? Constantly feasting on steamy helpings of gains from grandma's big, wooden spoon. It would be unseemly to complain. In fact, we should be thankful for an uptick in volatility. And lower near-term returns. As such factors unite to prevent investors from becoming too lethargic. Too collectively bullish. Which staves off the bull market's final, inevitable spasmodic conclusion. That end game will eventually arrive. So why rush it?
Two weeks ago, this missive provided a summary of the bull market. From its humble beginnings to its proud present. Including the bullish variables that have served as wind in its sales. Next week, we will consider the reverse side of that coin. And the possible headwinds that could derail this market. We would have done so this week. But the 9/11 tribute was more important.
Meanwhile, trade talks continue to drive headlines. As the Trump administration finalized the provisions to complete an amended NAFTA agreement with Mexico. But failed to work out the final details with our friendly neighbors to the north. It will happen. After both sides make their requisite political points.
Overseas, trade dominated as well. The EU said it may drop automobile tariffs if the U.S. does likewise. Though President Trump has been unreceptive to the overture. In fact, Trump threatened to withdraw from the World Trade Organization unless the body undertakes reforms. Additionally, Trump threatened to impose an additional $200 billion in tariffs on China as soon as next week. China threatened to retaliate. But they're running out of products against which they can do so.
Bottom line? China's mercantilism will either give way to fairer trade practices or it will be forced from the grownup table.
Meanwhile, a positive shift was achieved during recent Brexit negotiations. Markets had been digesting the idea that the UK might leave the EU next March without having an economic/trade deal in place. But comments from EU Brexit chief negotiator Michel Barnier that the EU was proposing "a partnership with Britain such as has never been with a third country" set off a short-covering rally in the British pound as hopes for a deal increased. Further bolstered by comments from French president Macron, stating that he envisions a Europe of concentric circles with the EU at its core and Britain in a second ring.
If only they'd been so unified in the first place.
Back home, U.S. jobless claims continue to shrink. Hitting their lowest levels since December 1969. Which is great for workers. But is it good for markets?
Consider this... Jobless claims fall. Which thins out the ranks of those looking for work. Which could put pressure employers to raise wages. Which could boost inflation. Which would annoy the Fed. Which could respond by further raising rates to ensure that the economy doesn't overheat. Which may curb commercial and residential borrowing. Which would freak out investors.
How's that for unintended consequences?
Positively, small-business confidence continues to hit record levels. Despite talk of trade wars and an increasingly tight job market. In this deregulatory environment, jobs and the economy have become the top issues for small companies. Outpacing health care and immigration, according to the latest CNBC|SurveyMonkey Small Business Survey.
The Q3 Confidence Index hit a record high of 62. Tying with results from Q1 2018. Sentiment has climbed as companies plan to increase hiring. With 33 percent planning to increase their number of employees in the next 12 months. Increased labor demand will likely bring wage growth. One of the key factors to middle class prosperity. And one that -- for the last decade -- has been like the Loch Ness monster. Often mentioned, but never seen.
Weekly Results
Major indices finished lower last week. The DJIA lost 0.19%. The S&P 500 fell 1.03%. The Nasdaq declined 2.55%. While small cap stocks lost 1.58%. 10-year Treasury bond yields rose 7.9 basis points to 2.94%. Gold closed at $1,196.57, down $4.83 per ounce, or -0.40%.