Disappointing September Results for the Stock Market

1 oct 2021

Statistically, September is the worst month for the US stock market. This is the only month that the SP500 has shown negative returns on average over the past 10, 20 and 70 years. What is typical September 2021, this statistics was fully and completely confirmed. The S&P 500 ended September with a 4.8% drop (the worst month since March 2020, when the pandemic caused panic and massive sell-offs in financial markets). The Nasdaq fell 5.3% (worst month since March 2020). The Dow fell 4.3% (worst month in 2021).

Tellingly, the decline was more than logical: the fundamental background is extremely unfavorable for the growth of prices in the stock market. We will list only the key factors of reduction (we have already written about them, but we will remind you). China's second largest developer, Evergrande, has failed twice in the past 2 weeks to pay off its bonds, which is a default (but the company still has a 30-day period to rectify the situation before the actual default becomes legal). The energy crisis from Europe spread to the whole world, especially the indicative situation in China, where factories are shutting down due to a lack of electricity; the debt crisis in the United States - Congress was unable to raise the ceiling of public debt, or at least extend the moratorium on it - which means that on October 18 we may face a default, but not a private company from China, albeit equal in volume to 2% of GDP, but the first economy in the world. Well, do not forget about the Fed and the change in the vector of monetary policy, which is even more deadly for the US stock market.

With such a background, we enter October and the answer to what to do next is, in general, obvious.

Are there any gaps in this dark realm? You can find them if you wish. For example, Congress yesterday at the last moment saved the United States from the shutdown. It didn't save but postponed the funding limitation until December 3, 2021. Plus, Biden's infrastructure plan continues to loom on the horizon, which has traditionally inspired buyers to new exploits. True, yesterday the Democrats failed to pass it, so here and now the infrastructure plan is more a minus than a plus. But sooner or later it will be adopted, so we will refer it to a promising positive.

Today is unlikely to be a breakthrough day, which means that the development of current trends is most likely. And they are such that the dollar is growing, the US stock market is falling, and gas prices in Europe are renewing their historic highs every day.