September to remember or to forget? Here are things working for and against the stock market

Published Mon, Sep 4 202310:58 AM EDT

Darn it all, we had to get overbought just when the market bulls got all of the momentum. OK, plus 3.4% on the S & P 500 Short Range Oscillator , which I have trusted for decades during volatile times, is not the end of the world. But this market is susceptible to downturns whenever we get to plus 5% and the downturns hit the megacaps stocks right in the kisser each time. Will it happen again? Historically, I am not a huge September fan. You could normally expect it to be great on paper. Companies get busy buying each other or issuing equity. Numbers get bumped up on a sense that the Federal Reserve might be pausing its interest rate hike cycle. The Fed itself seems to be winning in so many places. Egads, Zillow . You do feel like you have the wind at your back. Big IPO coming This September has a lot of those aspects. You have a very big calendar of deals, which usually bodes well when they are smart. The ARM Holdings' upcoming initial public offering (IPO) — set to be priced next week and debut Sept. 14 — could be excellent news. The venture capitalists have to be happy with this set of MongoDB -like winners, filled with artificial intelligence enthusiasm. Neither Club name Salesforce (CRM) nor ServiceNow — very much the beacons of the non-megacap but growing quickly enterprise software outfits — can spur the most loved segment for all tech hedge and mutual funds. Every time we mention the Oscillator, we're flooded with requests from Club members: "How can we access?" Well, we went directly to the source, our partners at MarketEdge, the data provider that publishes the Oscillator. We're excited to share that Club members can now get an exclusive discount for this helpful tool. Click here . Possible auto strike But other aspects differ. To start, barring a miracle, we are about to have a United Auto Workers (UAW) strike with union boss Shawn Fain threatening to upend the paradigm of helping the older workers to the detriment of the newer ones. Fain is not like the rest of the last 70 years of UAW leaders. He's back to the 1950s, and that means the heads of what seems to be a big three will be threatened to hire more people, pay them much more, have them work less, and stall the entire internal combustion engine (ICE) to electric vehicle (EV) transformation. You have probably read the same articles I have about how little the cost of labor really is to these three, which include Club name Ford (F). But those articles are specious. Car doors made of special steel aren't going to stop work on new vehicles. Nor are financings. Yep, this Sept. 14 won't just be known for the ARM deal, it will be known as the automakers' strike deadline, and it will have special import this time around because the old-line companies are spending billions and haven't been able to keep up with the non-union Tesla . There isn't all that much of a solution ever since the Big Three somehow decided that Mexico was not an option. The 1994 North American Free Trade Agreement (NAFTA) — replaced by the United States-Mexico-Canada Agreement (USMCA) in 2020 — had been a big win. Now ads talking about American-made can't take their place, especially when warranties are an issue, as they are at Ford, which we are all too sensitive to because of its a Club holding. These negotiations are also going to be about true colors. We have a self-proclaimed UAW president in Fain who does nothing to make Tesla pay the price while certainly making the auto chieftains aware that they have a solid enemy in the White House. Hollywood may be on strike and that can hurt Netflix viewing, but autos on strike will be a real setback to a stock market that cares about negatives when they are trends, and the trend toward more labor wins and capital defeats will be noted endlessly by the straw-grasping Mike Wilsons of the world. (Mike Wilson is Morgan Stanley's chief U.S. equity strategist. He often emphasizes the negatives in the market.) iPhone launch We've got plenty of rumors of the new iPhone with no official date (though invitations were sent out last week for a Sept. 12 event). But I think naysayers have their narrative locked and loaded. The biggest company on Earth, Club name Apple (AAPL), is always at the fulcrum of derision. This time shall be no different. Bond yield concern But my biggest worry is that the 20-year Treasury blows past 5%. Here's what's so unnerving about this. The bond market is like a "heads the bulls lose, tails the bears win" situation. When the yield curve was deeply inverted all we heard about was how we would have a severe recession. That was an endless warning. I am proud to say that I have always thought the 20-year would end up with a yield higher than the short rates, the way it's supposed to be. But now that I am about to be right, I am concerned. I never like higher rates at any end of the curve. The first thing you need to know is that when you get to 5% you will hear 6%. The next thing you'll hear is that when you get 6%, you get 7%. Trust me I have been in enough cycles to know this drill. At every benchmark, you will first hear that every bull market ends because of higher rates. It's not true. It always sounds good and is said in a stentorian fashion. Second, there is real competition when you get to those higher levels especially if the Fed has won the war against inflation. I like 6% for twenty years because it's a decent return, perhaps better given the so-called uncertain environment. I say "so-called" because when is it ever not? Third, there's a tremendous amount of bond issuance and the supply really does test this bull's resolve. I hate going back to the 1990s when stocks went down EVERY SINGLE TIME there was a bad bond auction. Nothing has changed now. The algos (the algorithmic computer trading programs) are probably set to erupt pretty violently at every big number. Now there will come a time when it will impact business, mortgages in particular. But that's not necessarily going to help because if the Fed has already won on so many other fronts, it doesn't need to win again. We have plenty of companies with great balance sheets, But we also know we have plenty of companies that will need to borrow. That means numbers are coming down. High financing costs will lead to lower earnings per share. THIS WILL HAPPEN. So my take is that we have to be very careful here. The march to 5% on the 20-year yield, if measured, will not cause a rupture — my term having just had a triple hernia operation — because we will be salivating over the coming Fed easing cycle. But if we get a whip to 5% in September, we just get earnings cuts ahead of October reports — and that, ladies and gentlemen, is what could make September a very difficult month indeed. Could there be some sort of salvation? Maybe even rates not going as high as 5% on the 20-year yield? Maybe the auto strikes slow things down? Maybe we get signals of two more rate hikes and they mean business in putting them through, which could stop the long rates from marching ever higher? Remember, the Fed's September meeting is right around the corner on Sept. 19-20. Sadly, for the bulls, I don't think so. The economy is just too strong and the Treasury bills are too big. Bottom line But, here's something to chew over. We have done well in the stock market at 7% on the 20-year and well at half that. We will have to adjust. There might be fewer winners. However, the showdown occurs this month. And, we have to hope we won't be over plus 5% on the Oscillator if, or when, we get to 5% on the 20-year. Because an overbought market under those conditions would be primed for selling. (Jim Cramer's Charitable Trust is long CRM, F, AAPL. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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Will it happen again?