Summer stock market momentum ran out.  What does history say about september.

Summer stock market momentum ran out. What does history say about september.

The US stock market’s summer rally from year lows in June came to a halt in August, leaving major indexes with monthly losses as investors brace for the start of a traditionally unpleasant month for stock bulls.

Since 1950, September has been the worst-performing month of the year for the DJIA.
-0.88%And the
S&P 500 SPX,
-0.78%
and email 1000 RUI,
-0.77%
And worse for the Nasdaq Composite,
-0.56%
Since 1971 and the Russell 2000 RUT compact size,
-0.62%
Since 1979, Jeff Hirsch, Stock Trader Calendar Editor, noted in a blog post.

But what happened in August? The first half of the month was all about momentum. After confirming a bear market in June with more than 20% down from its record end on January 3, the S&P 500 rebounded from its low on June 16. The rebound gained momentum in July and extended into August, removing a number of technical hurdles that prompted market watchers to consider whether the rally might be more than a typical bear market rally.

However, the 200-day moving average seemed like a bridge too far. After closing at a nearly four-month high on August 16, the S&P 500 index has stalled at the long-term average.

On the macroeconomic side, tentative signs of inflation peaking generated thoughts on the policy pivot by the Federal Reserve, as officials paused and then began to roll back interest rate increases in 2023 credited with providing a rally in equities. Federal Reserve officials have backed away from that scenario, and last Friday Bank Chairman Jerome Powell sent a clear message that rates are likely to rise and stay high for longer even if it leads to economic pain.

So on Wednesday, the last trading day of the month, stocks suffered a fourth consecutive loss, leaving the S&P 500 down 4.2% for the month, the Dow down 4.1%, and the Nasdaq down 4.6% in August. The S&P 500 is down 17% year-to-date, the Dow is down 13.3% and the Nasdaq is down 24.5%.

deep dive: Here are the worst (and best) performing stocks for August and 2022

September often brought more monsoon headwinds in the years when stocks were low year-to-August, analysts at Bespoke Investment Group said in a note Wednesday, citing the performance of the S&P 500 going back to 1928.

“When the S&P was down year-to-date (year-to-date) through the end of August (as it is this year), the index had fallen on average by 3.4% in September, while September was flat when the index was high since beginning of the year to date. per month,” they wrote. “Throughout the remainder of the year, the index recorded an average loss of 1.2% when arriving in September with year-to-date losses and 3.3% gains when arriving in September above year-to-date.” (See chart below) .

Bespoke Investment Group

MarketWatch’s Mark Hulbert wrote in his August 23 column that September’s weak market performance shows “notable consistency.” However, the problem for traders is that the cause – if there is one – remains a mystery, making bets based solely on the pattern questionable.

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