Why being cautious investors in September may be justified
Decades of market data point toward September’s reputation as a spoiler for stock market rallies, building the case for challenges over the coming weeks despite positive August momentum. CNBC’s analysis of FactSet data — starting from 1928 for some markets — shows that September has, on average, been a losing month for the S & P 500 , the pan-European Stoxx 600 , and the MSCI World Index . The historical outlook for September appears particularly downcast for U.S. and European markets, following last month’s gains. The analysis of the relationship between the two months reveals that, after a positive August, the S & P 500 has ended September in negative territory 56.4% of the time, and was only up during 24 years out of 55. The trend is even more pronounced for the Stoxx 600, which saw September declines during 67% of the time after posting gains in August, according to CNBC’s analysis of market data starting in 1987. The average monthly return for September underscores this “September Effect,” with the S & P 500 losing an average of 1.2% and the Stoxx 600 declining by 1.35%. The historical data offers a slightly more optimistic picture on a global scale. For the MSCI World Index, a positive August has historically led to September gains during 55% of instances, suggesting that global diversification might offer some portfolio resilience. While past trends provide valuable context, they are not a guarantee of future performance. This year, investors will be weighing these historical headwinds against pressing macroeconomic factors, including persistent inflation and the outlook for central bank interest rate policy. Many equity strategists at investment banks say that a rate cut by the Federal Reserve in September is likely to boost sticks and reverse the historical trend.
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