The summer stock market rally has run out of steam. What history says about September.

The U.S. stock market’s summertime rally from year-to-date lows seen in June came to a halt in August, leaving major indexes with monthly losses as investors braced for the start of a traditionally unpleasant month for bulls scholarship holders.

Since 1950, September has been the worst performing month of the year for the Dow Jones Industrial Average

and Russell 1000

and the worst for the Nasdaq Composite

since 1971 and the small cap Russell 2000

since 1979, noted Jeff Hirsch, editor of the Stock Trader’s Almanac, in a blog post.

But what happened in August? The first half of the month was devoted to momentum. After confirming a bear market in June with a fall of more than 20% below its all-time high on January 3, the S&P 500 rebounded from its low on June 16. The rebound accelerated in July and extended into August, eliminating a number of technical barriers that market observers wondered if the rise was perhaps coming more than a typical bearish rally.

The 200-day moving average, however, appeared to be a bridge too far. After ending at a nearly four-month high on Aug. 16, the S&P 500 has stalled at the long-term average.

On the macro side, tentative signs of a spike in inflation generated notions of a policy pivot from the Federal Reserve, with officials pausing and then starting to reverse interest rate hikes in 2023 and credited to have raised the shares. Fed officials pushed back on that scenario, and last Friday Chairman Jerome Powell sent a clear message that rates were likely to rise and stay high for longer, even if it meant economic hardship.

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 Jones down 4.1% and the Nasdaq with a loss of 4.6% in August. The S&P 500 is down 17% year-to-date, while the Dow Jones has fallen 13.3% and the Nasdaq 24.5%.

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

September has often provided even more seasonal headwinds in years when stocks were down year-to-date through August, analysts at Bespoke Investment Group said in a Wednesday note, citing the performance of the S&P 500 dating back to 1928.

“When the S&P is down year-to-date (so far) through the end of August (as it is this year), the index has averaged a decline of 3, 4% in September, while September was flat when the index was up year-to-date in the month,” they wrote. “For the remainder of the year, the index recorded on average a loss of 1.2% entering September with losses since the beginning of the year and a gain of 3.3% entering September since the beginning of the year. (See table below).

Tailor-made investment group

September’s weak market performance over the month shows “remarkable consistency,” MarketWatch’s Mark Hulbert wrote in a column from August 23. The problem for traders, however, is that the cause – if there is one – remains a mystery, which makes placing bets based solely on the pattern a dubious proposition.

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