September's Surprise Rally Is Only the Beginning VIEW IN BROWSER This isn’t supposed to happen. Normally, when the calendar flips to September, investors who know their market history tend to cringe. That’s because they know it’s the weakest month of the year. According to Dow Jones Market Data, September has been the worst month of the year for the S&P 500, Dow and NASDAQ – with each averaging declines of 1.1%, 1.1% and 0.9%, respectively. In fact, the S&P 500 has only been able to squeak out a gain in September 44.9% of the time since 1928. But not this time around. So far, September hasn’t shown any of its typical seasonal weakness in the first half of the month. Through the first three weeks of the month, the S&P 500 soared 3.2%, the Dow rallied 1.7% and the NASDAQ surged 5.5%. So, even though history tells us otherwise, the market has defied the odds and is on track for a sixth straight month of gains. The point is, it’s been quite the September to remember. And the good news is, this rally is not over yet. You see, we’re on the verge of what could be a phenomenal few months for the stock market, as several positive events are set to propel stocks higher. So, in today’s Market 360, I want to share what these events will be… and a hidden driver for profits most investors don’t see coming. Key Interest Rate Cuts The Federal Reserve cut key interest rates last week by 0.25%, bringing the federal funds rate down to a range of 4.00% to 4.25%. The decision was nearly unanimous at 11-1, with the lone dissenter actually pushing for a deeper 0.5% cut. We discussed the meeting in last Thursday’s Market 360, but the fact is, there were a couple of reasons why the Fed stopped at a quarter-point cut. First, the uptick in consumer inflation was still concerning, even though the core Consumer Price Index (CPI) came in line with expectations at a 0.3% increase in August. Second, retail sales came in much stronger than anticipated. August sales rose 0.6%, doubling economists’ expectations for a 0.3% gain. Excluding vehicle sales, they climbed an even stronger 0.7%. July’s retail sales were also revised higher. Additionally, the cracks in the labor market are widening. The most recent jobs report showed only 22,000 jobs were added in August, with the unemployment rate rising to 4.3%. That’s down sharply from 73,000 jobs created in July and well below economists’ estimates for 75,000 in August. The housing industry also remains weak, burdened by falling home prices and elevated mortgage rates. Over the past 12 months, median home prices have barely budged, up just 0.2% through July. So, while I would have preferred a 0.5% cut, I was pleased to see the Fed act – and even more encouraged by the dovish tone of its statement. Officials acknowledged that inflation “remains somewhat elevated,” but also noted that unemployment has “edged up” and “downside risks to employment have risen.” Fed Chair Jerome Powell went further, admitting, “Labor demand has softened, and the recent pace of job creation appears to be running below the break-even rate needed to hold the unemployment rate constant… I can no longer say the labor market is very solid.” Clearly, the Fed is now shifting its focus toward jobs. And with its dovish tone, last week’s rate cut sparked more buying pressure and drove stocks higher – with all the major indexes ending the week at record highs. | Recommended Link | | | | Write these three letters down: Q.P.U. According to Bank of America… This new tech could be the biggest revolution for humanity since discovering fire. It could change everything. Click here to get the details. |  | | Quarter-End Window Dressing September also marks the final month of the third quarter. And if you’ve been a reader for a while now, then you know that the end of the quarter ushers in another phenomenon: quarter-end window dressing. Essentially, quarter-end window dressing occurs when institutional fund managers and investors shore up their portfolios and make them “pretty” for their clients before the end of the quarter. To do this, they sell the underperformers and scoop up the best-performing, most fundamentally superior stocks. This is great news for the markets – and especially for the stocks identified by the system that powers my Accelerated Profits premium service. Specifically, I look for small- and mid-cap stocks to benefit immensely from quarter-end window dressing in the final weeks of September. Third-Quarter Earnings Season Speaking of earnings, the second-quarter earnings announcement season was spectacular. But the third-quarter earnings season may be even more impressive. According to our friends at FactSet, the average S&P 500 company posted earnings growth of 11.9% and sales growth of 6.4% for the second quarter. Analysts only anticipated 4.8% average earnings growth at the end of the second quarter. But 81% of S&P 500 companies posted a positive earnings surprise and drove the S&P 500’s earnings growth rate higher. I suspect we’ll see this trend continue to play out in the third-quarter earnings season. Current estimates call for 7.7% average earnings growth and 6.3% average sales growth for the third quarter. But I look for wave after wave of positive earnings surprises to not only drive the S&P 500’s actual earnings results higher but also propel stocks higher when the season commences in October. An Early January Effect After the third-quarter earnings season winds down, I expect an “early January effect” to commence in November. Simply put, this phenomenon typically occurs when folks pour money into their retirement accounts, employers contribute to their employees’ retirement savings, and financial gifts are made prior to the end of the year. These contributions can significantly boost small- and mid-cap stocks. In fact, last year, an early January effect drove the small-cap Russell 2000 to new all-time highs. Well-Positioned for a Strong Finish to 2025 Now, the surge in the market since the early April low has been historic. But it’s not over yet, not by a long shot! You see, the factors above should combine to propel fundamentally superior small- and mid-cap stocks higher through the end of the year. Personally, I expect these final days of September to serve as a launching pad for the rest of the year. The bottom line is this that all the seasonal trends, all the Fed shifts, all the institutional positioning we’ve talked about today – they’re pointing to one thing: The final days of September are setting the stage for something big. And I don’t say that lightly. After nearly five decades in this business, I can tell you when the pieces start to line up… when the money starts to move… and when the opportunity in front of us is simply too great to ignore. That’s exactly where we are right now. A week from today, on September 30, a floodgate is going to open and $7 trillion is going to pour in from the sidelines. I call it the Trump Shock, and I believe it will send a very small group of stocks soaring – while leaving the rest of the market behind. My Stock Grader system has already zeroed in on the five companies best positioned to ride this wave. Each one carries my highest rating. And I’ve put all the details – including the name and ticker of one company I’m giving away for free – in an urgent new briefing I’ve just released. Click here now to watch my briefing and make sure you’re in position before September 30. Sincerely, | .png)
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