As the calendar flips to autumn, investors often approach the stock market with caution. Historically, September has been a troublesome month, with the S&P 500 averaging a decline since 1928. This phenomenon, known as the September effect, has puzzled experts, who point to various factors such as post-summer vacation portfolio rebalancing, profit-taking before the new school year, or other seasonal influences.
However, this year appears to be bucking the trend. Despite the S&P 500’s typical September slump, the index has surged to new heights, posting a 1.4% gain so far this month. The Fed’s recent 50-basis-point interest rate cut and the ongoing debate surrounding artificial intelligence stocks have contributed to the market’s upward momentum.
Interestingly, the S&P 500 has only experienced a September gain seven times since 2009. In five of those instances, the index continued to rise in the fourth quarter, with average gains exceeding 5% or an annualized return of over 20%. The lone exception was 2018, when Fed rate hikes and trade war fears led to a sharp decline.
While past performance is no guarantee of future success, the current trend is encouraging. As investors look ahead to the fourth quarter, they should consider the various factors that will influence the market, including corporate earnings, Fed policy, the presidential election, and holiday spending.
Ultimately, it’s essential to maintain a long-term perspective. The S&P 500’s historical compound annual growth rate of 9% with dividends reinvested serves as a reminder of the American economy’s resilience and the index’s potential for continued growth.
In uncertain times, it’s wise to seek guidance from seasoned analysts. With a track record of outperforming the market, their insights can prove invaluable in navigating the complex landscape of the stock market.
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