Although this may come a couple weeks late for some, the month of September has been a kryptonite to market yield for about a 100 years. In a recent Barron’s article written by Jacob Sonenshine, he writes “...Since 1928, the average September return for the S&P 500 has been a 0.99% loss” (Sonenshine). This could be influenced by several reasons. For one, it is generally believed that investors return at the end of their summers and would like to capitalize on market gains before the upcoming tax season. September 2021 may or may not follow the historical trend. As Sonenshine points out, “...Over that 93-year span, the S&P fell in 54% of the Septembers. But when markets rose from January through June, 63% of the Septembers saw positive gains” (Sonenshine).
From a long-term perspective, September market blues shouldn’t necessarily encourage people to “sell high”. Conversely, many investment professionals may tell you it’s a good time to add to your existing portfolio while securities drop in value. But there are two sides to every argument, and maybe even more so in a year the world is trying to overcome the likes of the COVID-19 pandemic.
This year in particular, September market yield may be influenced by more than the average year. Federal policy and the new legislative agenda, increasing Consumer Price Index (CPI), the recently published jobs report, and the ever-evolving pandemic may throw a wrench into the hands of investors.
The Federal Reserve has been a blessing for most people over the last 18 months, with multiple rounds of stimulus checks and an easement of interest rates. However, individuals may not have the same relationship with the government much longer. The CPI is scheduled to be released on September 14, and with inflation running its course, an increase in Treasury yields may follow. Also, a decrease in bond purchases, as we have seen this year, has historically led to an increase in interest rates. The Fed will be “showing it’s hand” on September 22 at its meeting regarding bond purchases. These are both reasons for investors to be weary of future market returns.
The increase in delta variant cases around the country may slow the growth of some retail stocks. If retail stores and restaurants see less foot traffic, less revenue will result ultimately leading to a decrease in Earnings Per Share (EPS) expectations. Additionally, the onboarding of new employees may not always prove well for investors either. New employees bring on additional expenses that decrease companies’ bottom-line numbers, and there are a lot of people without jobs as it stands today. A record 10.9 billion job openings were available in July (Fitzgerald and Lee).
The previously outlined reasons, government policy, the jobs report, and the COVID-19 pandemic are only a couple reasons why we may witness a market pull-back this September. There are many others not touched that may have a similar impact on investor gains over the next two weeks and beyond. In conclusion, historical “September blues” in itself should not be the sole reason for investment choices. Taking a holistic approach and correlating risk tolerance to financial needs and goals suits investors much better in the long run.