If August wasn’t bad enough, historical trading patterns suggest that investors shouldn’t expect a quick rebound this month.
September is statistically the worst month of the year for the stock market, with the S&P 500 index logging an average decline of 1.03 per cent in the month over the last 87 years, according to data from S&P Dow Jones Indices.
While there is no specific reason for the stock market’s so-called seasonality, traders and investors do closely follow the historical trends. That could make them a little more nervous this September and, as a result, stocks could remain volatile for a few weeks yet.
“If you’re a watcher of seasonality you would not be optimistic for the next six weeks or so,” said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute. “It’s just a pattern that has played out often enough for people to pay attention to.”
MORE: Recession woes, global rout send TSX to triple-digit loss
As well as worries about the health of the Chinese economy, investors are also concerned about the outlook for U.S. interest rates. There is speculation that Federal Reserve policymakers could lift rates for the first time in close to a decade as soon as this month.
Here’s a look back at some recent September slumps for the S&P 500 index of U.S. blue chip stocks:
Year: 2000
Decline: – 5.4%
Reason: Worries about U.S. corporate earnings and rising oil prices.
Year: 2002
Decline: – 11%
Reason: Concerns about the economy, U.S. starts moving toward war with Iraq.
Year: 2008
Decline: – 9.08%
Reason: Wall Street giant Lehman Brothers files for bankruptcy, beginning of global financial crisis.
Year: 2011
Decline: -7.18%
Reason: U.S. loses top-of-line credit rating, European financial crisis
WATCH: More wild swings on markets as China stocks continue to plunge. Jackson Proskow reports.
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