The September Setup: The Investment Committe's Strategy 9/1/26

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**Scott Wapner** (1:00)
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All right, guys. Thank you very much. Welcome to the Halftime Report. I'm Scott Wapner. Front and center this hour. The September setup for stocks yields the momentum trade. They are both in focus. We trade all of it with the committee. Joining me for the hour today, Joe Terranova, Stephanie Link, Jason Snife, Josh Brown. Take you to the markets here. We are beginning a new month, one that you all know by now is traditionally unkind to you. Let's see what happens now. Dow, by the way, up 15 of the past 16 months. How about this stat? In the past almost 100 years, the Dow's only been positive 15 of 16 months one other time during a 19 for 20 streak all the way back in 35 and 36 All right, what's going to determine what happens this month? Yields, check. Momentum, check. So we come to you, 10 year highest since January 25 Momentum's lower, chips are weaker. Momentum underperformed the S&P in August. S&P was up 2.6%, momentum was only up 0.3. And I bring you this one stat before I let you go.
I said it yesterday, okay?
The index, momentum, is on track for the biggest quarterly underperformance in 25 years. It's tumbled more than 9% since July 1st. That lags behind the S&P's 2.8% gain.

**Frank Holland** (2:41)
Okay, so I think that's a setup for you.

**Joe Terranova** (2:43)
I think the setup for September, and the message for the viewers is as follows.
Quality, over the current quarter, while momentum has been down double digits, quality has actually been up 1.5%. So the market has somewhere to retreat to. What I'm seeing in front of me now is last week's disappointment surrounding the inability, in particular, for high beta momentum, to get that shot of adrenaline off of NVIDIA's earnings, the derivative trade, and off of Marvell's earnings. I think that's leading to a significant amount of bearishness as it relates to sentiment. I think the sentiment is beginning to turn, and I actually believe that's the first thing that you want to see if, in fact, you are going to reach a bottom for a factor.

**Scott Wapner** (3:35)
You mean sentiment turning more negative or cautious?

**Joe Terranova** (3:40)
Yes. I think people are recognizing what we have described over the last several weeks, the momentum factor is underperforming, the disappointment for the lack of that shot of adrenaline last week, and when sentiment finally turns, that actually is the moment where you don't want to get too bearish. So I think the setup potentially is that high beta momentum, momentum itself gets a little bit of a recovery rebound here in the near term. Watch the semis. The semis are showing a little bit of strength here, intraday.
Micron, I believe, is higher as we speak. That's going to be my indicator, but I would not get too bearish right now on the fact that momentum has had this ugly quarter.

**Scott Wapner** (4:23)
Okay.
So the cautious cavalry has arrived. That's a fact because to Joe's point, Citadel Scott Wapner, Citadel Securities, okay, I follow what he says and when he says it, and so do a lot of other people on the street.
He says the near-term risk reward has changed. Points to the following. Earnings delivered and are now largely behind us. Retail remains a buyer but historically becomes a smaller source of incremental demand in September.
Systematic exposure has rebuilt. The corporate bid should fade as the blackout window returns. After a significant collapse in volatility, that tailwind is now largely behind us. So you take all that in total and then he goes one step further and says the following and I quote, I would use strength to reduce some exposure and add inexpensive protection into this event window. I'm not looking for the beginning of a broader bearish turn. I am looking for a tactical reset. If September delivers one, it could create a better entry point as we move toward a potential more constructive setup beginning around mid October. Stephanie Link.