As August comes to a close, investors are preparing for what is historically known as the worst month for equities. Despite the volatility in global markets a few weeks ago, the S&P 500 closed near its all-time highs, signaling optimism among traders.
Looking back at historical data, September has not been kind to stocks. Since 1950, the S&P 500 has seen an average loss of 0.7% for the month of September and finished higher only 43% of the time. In fact, the last four Septembers have been particularly weak, with the index posting significant declines.
But why does September tend to be a weaker month for stocks? One reason could be that investors returning from summer vacations reassess their portfolio positioning defensively. Companies also start preparing budgets for the upcoming year, while mutual funds engage in “window dressing” by selling off positions to reduce capital gains distributions.
Adding to the potential concerns for this September is the fact that 2024 is an election year. Bespoke Investment Group noted that during post-World War II presidential election years, the Dow Jones Industrial Average has averaged a decline in September. This adds an extra layer of uncertainty to an already challenging month for equities.
As we look ahead to September, investors are eagerly awaiting more data on the state of the economy and the labor market. The Federal Reserve is expected to begin cutting rates next month, with Powell signaling his intention to prevent further job market cooling. This, along with other economic indicators, could help provide some clarity for the market moving forward.
At Extreme Investor Network, we understand the challenges that come with navigating the financial markets, especially during volatile times like September. Stay informed with our expert analysis and insights to make informed investment decisions and potentially turn challenges into opportunities in the fourth quarter.
Stay tuned for more updates and analysis on market trends, economic data, and investment strategies at Extreme Investor Network. Let us help you navigate through the challenges and uncertainties of the financial markets.