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Good morning! I’m wrapping up my Fulbright award in Berlin, where I’ve learned about how the German economy compares to that of the US and how everyday consumers feel about EU monetary policy.

I’ll share my takeaways next week.

Before that, let’s talk stocks.

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Fed juice is here

Two days after the Fed’s first interest-rate cut in four years and the stock market appears on track to shake its long-standing September slump. 

We’re more than halfway through what’s historically the worst month of the year for stocks. Dating back to 1948, the S&P 500 in September on average sees a 0.7% decline, according to data from BMO Capital Markets.

For context, February is the second-worst month of the year, though it sees a far milder 0.1% dip on average. 

Nonetheless all three benchmark indexes are comfortably in the green through the first 20 days of September.

Recall that at the beginning of the month, the opposite was true. All three indexes were down more than 1.8% after the first week of trading.

What’s driving the momentum right now? 

The Fed’s decision to go jumbo with a half-point cut Wednesday certainly helps. 

As Eric Wallerstein, chief markets strategist for Yardeni Research, wrote in a column for Opening Bell Daily this week, a bigger-than-usual move from the Fed usually only happens when the economy is on shaky ground or worse. 

Depending how much you’re willing to squint, you can find pockets of strength or weakness across markets and the economy right now:  

• Record US household wealth

• Stocks hitting record highs

• Historic housing prices

• Cumulative consumer prices have skyrocketed since 2021

• Corporate bankruptcies have surged this year 

Whether you anticipate a recession or not, the Fed’s rate cut still marks the start of a brand new monetary easing cycle.

And, in theory, cheaper borrowing costs should usher in more liquidity into markets as well as gradually improving conditions for consumers. 

“The US has near full employment, steady consumption, and rising real wages,” said Paul Donovan, a UBS economist. “This is no economic emergency.”

The S&P 500 and Dow are both on pace for their best Septembers in five years, according to a Barron’s analysis. Meanwhile, the tech-heavy Nasdaq Composite is eyeing its best September in eight years. 

“Markets like rate cuts,” said Jamie Cox, managing partner for Harris Financial Group. “Especially big ones when the economy is strong.”

Comments, contentions or feedback? Reply to this email or let me know on X @philrosenn.

Elsewhere:

🧙 Wall Street’s triple-witching has arrived. This happens every quarter, when options for individual stocks, indexes, and ETFs expire on the same day. This time around, about $5.1 trillion in value will fall off the board. (Bloomberg)

🏘️ US home sales dipped in August. The recent decline in mortgage rates didn’t help offset the historic highs in home prices. Compared to July, sales of previously owned homes dropped 2.5%, the National Association of Realtors reported Thursday. (WSJ)

✂️ What if rate cuts actually slow the economy down? One JPMorgan analyst warned of the dangers of a double-sized policy adjustment. In his view, it’s possible that the Fed’s attempt to juice the economy could backfire. When people begin to anticipate lower rates, it’s possible they keep holding back on spending so they can wait out for even lower borrowing costs. (Business Insider)

Rapid-fire:

• Nike’s CEO John Donahoe is retiring and company veteran Elliott Hill will replace him (CNBC)

• The iPhone 16 has officially arrived in stores (Business Insider)

• Big banks are divided on how fast they think the Fed will cut interest rates (Bloomberg)

• Hedge-fund giant Two Sigma is likely to pay as much as $100 million to settle an SEC investigation (WSJ)

• The Bank of Japan kept its benchmark interest rate unchanged at 0.25% (CNBC)

• Initial jobless claims came in lower-than-expected for the week to September 14, falling to the lowest since May (Bloomberg)

Last thing:

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