The “September Curse” of U.S. stocks seems to be particularly effective this year, with the S&P 500,Dow JonesIt delivered the worst performance in the same period so far in 2002. Although October is known as the “Bear Market Terminator”, this seasonal trend may not be as good as the deterioration of the global economic fundamentals this year, and those who expect a rebound may be disappointed.
The three major indexes had a sluggish performance in September, with the S&P down 9.34%,Dow Jonesdown 8.84%,Nasdaq Composite Indexfell 10.5%.S&P andDow Jonesthe biggest quarterly decline so far in 2002,that fingerIt was the worst since 2008.
MarketWatch reported that the S&P fell more than 7% in September more than 11 times, according to data going back to 1928.Dow Jonesis 13 times,that fingerFrom 1986 to date, there have been six September falls of more than 9%.
Historical data also shows that whenever the S&P fell more than 7% in September, it edged up an average of 0.53% in October. Usually, if there is a particularly sharp decline in September, there is a 54.55% chance that it will rise in October, which is slightly lower than the probability of rising in October in previous years (57.45%).
Known as the “bear killer,” October has ended in 12 post-World War II bear markets, seven of which occurred in midterm election years. The United States will also hold midterm elections on November 8 this year.
But seasonal trends can only be used as a guide. Many analysts believe that under the circumstance that central banks are trying to suppress inflation, it may be difficult for US stocks to blow the horn of a counterattack in October this year.
Ralph Bassett, chief investment officer at Abrdn Asset Management in Scotland, said that in many ways, this year has been an extraordinary year, which means it is difficult for U.S. stocks to replicate historical experience.
Anthony Saglimbene, chief market strategist at Ameriprise Financial, also said that there have been several historic crashes in October, such as the 1987 and 1929 stock market crashes. He believes it will take a few more months before the general economic trend has better visibility.
JPMorgan strategist Marko Kolanovic is the latest example of succumbing to pessimism, concerned regarding possible missteps in central bank policy and escalating geopolitical tensions following the destruction of Europe’s Nord Stream gas pipeline.
During the Fed’s cycle of rate hikes, stocks have often struggled to find a bottom before policy turns. Bloomberg pointed out that although there are some rebounding forces at present, including extremely pessimistic market sentiment, excessive stock market sell-off, and bottoming of fund positions, but because the Federal Reserve (Fed) is still actively fighting inflation, financial conditions are bound to continue to tighten.
During the last six bear markets, stocks bottomed only following the Fed began cutting rates, and bond traders now expect Fed rates to not peak until April 20223, apparently too early to cut rates.