Historically, September is considered the worst month for the stock market. However, this year some experts are optimistic about September.
• September is the worst performing month of all months in the past 95 years
• Ed Yardini expects a weak September
• BoA and other experts with an optimistic outlook for September
“Come back in September”
“Sell in May and go away, but always remember to come back in September.” Everyone interested in the stock market has probably heard this wisdom at least once. The best-known stock market wisdom has its origins in the traditions of the British upper classes of the 17th and 18th centuries, which significantly influenced events on the London Stock Exchange in their time. In the hot summer months, numerous merchants and bankers left the city. They finally returned in September. Before they left, however, they hastily sold their shares and only resumed their stock market activities after their return in September. However, during these summer months there was a lack of investors on the trading floor, which led to a lack of demand and caused prices to collapse. After the summer season, the market recovered again and gained momentum.
But this phenomenon was not only observed in the 17th and 18th centuries. In recent years and decades, stock market activity has repeatedly declined during the summer months. Historically, September is considered the worst month for the stock market, as CNN explains. Between January 1928 and August 2023, it can be seen that the month of September performed the worst with 52 negative months and 42 positive months.
Experts disagree about September
This year, however, experts are not so unanimous about the September effect. For example, Ed Yardini, President of Yardini Research, expects a weak September 2023, according to Market Insider. “On Sunday we found that September is a good month for apple picking. It is widely viewed as a slow month for stocks, which has been true for 55 percent of September months since 1928,” he said in a statement. So while September is considered an unlucky month, he says it is also a profitable opportunity to invest in cheap stocks ahead of the typical Christmas rally at the end of the year. In particular, Yardini cited rising oil prices, inflation risks and China’s weakening economy as things that could cause problems for investors this month.
Tom Lee, head of research at Fundstrat, had slightly more optimistic words about this September. In his opinion, the stock market could withstand the weak September for three reasons. The first reason lies in its analysis of seasonal trends, as Market Insider reports. According to Lee, there have been eight months since 1950 in which stocks rose more than 10 percent through August but fell in the first three days of September. However, in five of those eight months, stocks ended the remainder of September higher. “That’s why I don’t think you should lose hope,” explains Lee. In addition, investor positioning trends in the options market also suggest that an end to the sell-off is in sight. Finally, falling used car prices would also indicate that inflationary pressure is easing, explains Lee. This, in turn, could ease pressure on the Fed to raise interest rates further – a prospect that would be favorable for stocks. “So bottom line: a bumpy start to the month. It’s rather unfortunate that in the first three days [im September] “We’ve been strong, but the fact that it’s weak doesn’t mean the rest of the month is a write-off,” Lee said.
Bank of America with an optimistic outlook
Bank of America also sees good prospects for September. “The best scenario for both September and the rest of the year is if the S&P 500 rises between 10 percent and 20 percent from January to August,” Bank of America technical strategist Stephen Suttmeier said in a note to the market Insider has seen. In the first eight months of this year, the premium on the reference index was around 17 percent. The AI-powered rally has boosted stock prices in the past few months of the year. According to Suttmeier, this also indicates further rallies.
Wharton professor Jeremy Siegel also offers a longer-term outlook. According to Siegel, the US stock market is on solid ground and the real estate market is struggling against the rise in mortgage rates for now. Stocks could definitely hold their own in this market environment. The main reason for this is that inflation is falling, which reduces the likelihood of further interest rate increases. “The likelihood that the Fed will raise rates in September is now almost zero, and in fact this puts the November hike in doubt,” he adds.
Editorial team finanzen.net
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