Historical data reveals September is typically the weakest month for stock market performance, posing a potential challenge to the positive momentum from August. An analysis of market data, in some cases stretching back to 1928, shows that the S&P 500, the pan-European Stoxx 600, and the MSCI World Index have all averaged losses during the month.
The outlook is particularly challenging for U.S. and European markets following gains in the preceding month. After a positive August, the S&P 500 has historically finished September lower 56.4% of the time. This trend is even more pronounced for the Stoxx 600, which has declined in 67% of Septembers that followed a month of gains. The average monthly return underscores this “September Effect,” with the S&P 500 losing 1.2% and the Stoxx 600 falling 1.35% on average.
On a global scale, the data is slightly more optimistic. The MSCI World Index has seen September gains 55% of the time after a positive August, suggesting that global diversification may offer some resilience.
While past performance provides valuable context, investors are also weighing current macroeconomic factors, including persistent inflation and the direction of central bank interest rate policies. Many equity strategists suggest that a potential interest rate cut by the Federal Reserve in September could be enough to boost stocks and reverse the historical trend.
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