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People pass by the New York Stock Exchange. (NYSE) on Wall Street
ANGELA WEISS / AFP / Getty Images
The stock market usually performed poorly in September. This year could be different, precisely because stocks have already risen sharply during the year.
September is usually one of the worst months of the year for the stock market, but stocks are doing better at times when they’ve already done well. Over the years dating back to 1928, the average September return of the
S&P 500
has been a loss of 0.99%. This makes the month much worse than May, which ranks second in investor obscurity with an average loss of 0.11%.
History indicates that September 2021 could be a good month for stocks. In the years after 1928, when the S&P 500 rose more than 13% in the first six months, the average gain in the index in September was 1.4%, according to Fundstrat. Until June this year, the broad market benchmark increased by 14%.
The index rose in September by 63% of the years in which the market charged in advance from January to June, while it fell during the month by 54% of the years during this global period.
The recent rise in the stock market has bolstered hope that the index will do well for the rest of the year. Recently, Wells Fargo strategists raised their target for the S&P 500 to a level that reflects more than 6% up from the current index level. They say that in years when the index records double-digit gains in percentage terms over the first eight months, it increases another 8% to complete the year. The data go back to 1990.
The index closed Thursday to 4522.68, which ends August with a year-on-year gain of 20.4%.
Be aware that the upward journey may be bumpy. The S&P 500 has not fallen more than 5% this year. With several risks on the horizon, including an increase in corporate tax that could reduce the S&P 500’s aggregate profit by 5%, stocks could see a correction.
“Markets are‘ overbought ’and there is a setback,” writes Tom Lee, head of research at Fundstrat. Don’t be surprised to see how the market gains a little more.
Write to Jacob Sonenshine at [email protected]