Stock Market Today: Dow scores new record close as expectations grow for jumbo rate cut
September has historically been the worst month for U.S. equity returns — but the second half of the month has been particularly difficult for investors.
Ned Davis Research’s Ed Clissold pointed out in a report shared with MarketWatch on Monday that, since 1950, the two-week stretch at the back half of September has consistently been the worst stretch for the S&P 500 of the entire calendar year, on both a median- and average-return basis.
What’s more: During election years, weakness in the second half of September tends to spill over into October.
Whether or not investors will see the market’s self-fulfilling prophecy play out again remains to be seen. But there’s reason to remain optimistic this year, despite the recent pickup in volatility.
Clissold pointed out that technicals for the largest U.S. stocks remain strong. Furthermore, stocks rallied last week as expectations for a 50-basis-point interest-rate cut by the Federal Reserve strengthened, suggesting growing enthusiasm for a larger cut.
“The Fed has all but told investors it will cut. The rally late last week on rumors of a 50-basis point cut shows how sensitive the market remains to Fed policy despite Powell’s telegraphing of his plans. A friendly Fed could well overshadow negative seasonals,” Clissold said.
Even if weakness does arrive on schedule, it could be short lived. Year-end stock-market rallies tend to be stronger during election years, with weakness in September and October swiftly followed by strong rallies in the second half of November and December — two of the strongest periods for stocks during election years.
Bottom line: Investors should consider seasonals as they evaluate risks to their portfolios. But never forget the old market motto: “Don’t fight the Fed.”