One of the key features of the 2018 edition of the stock market is that it has remained surprisingly durable in the wake of heightened tensions from President Donald Trump’s continuing trade war and the Federal Reserve’s shift to a more hawkish stance.
Now, the market will be put to an even more rigorous stress test in September, with the month among the worst for stock performance.
Since its inception in 1928, the S&P 500 SPX, -0.17% has finished lower in September more than any other month, or 55% of the time for an average return of negative 1.01%, according to Dow Jones Data Group.
For the Dow Jones Industrial Average DJIA, -0.30% the record is equally dismal, with the blue-chip benchmark also seeing its worst performance in the month, declining 70 times out of 121 Septembers for an average return of negative 1.03%.
September is likewise a poor month for the Nasdaq COMP, -0.13% with the technology-heavy index falling 45% of the time since 1971 for a negative return of 0.49%.
Stock returns for each month of the year
Much of the month’s abominable record can be attributed to seasonality, with investors slow to return from summer vacations, resulting in low trading volumes, which partly contributes to elevated market volatility. In fact, market activity on Wednesday was the thinnest for the year with only 5.19 billion shares trading hands, tracking total composite volume of trading on the Nasdaq, NYSE and its various exchanges.
Indeed, the stock market could theoretically come under intense pressure as speculation about the possibility of Trump’s impeachment mounts after his campaign chairman Paul Manafort late Tuesday was found guilty on eight charges including tax fraud. In a double blow, Trump’s former lawyer Michael Cohen admitted that he violated campaign-finance law at Trump’s direction.
However, with the exception of a scant few bumps, the market has held steady with most market observers generally expressing doubt that the Trump’s political drama will hurt investor sentiment that has thus far been underpinned by a health economy and strength in corporate results.
See: Here’s why a rising Trump impeachment threat isn’t rattling the stock market
And just looking at short-term data for the bull market that became the longest on Wednesday, the one month period starting from Aug. 21 had been among the best with the S&P 500 posting a median gain of 3.31%, according to Bespoke Investment Group.
Read: This bull market may soon silence all the critics
On top of that, the midterm elections may help dull the stock market’s propensity to downshift in September, at least statistically speaking.
Jeff Hirsch, editor of the Stock Trader’s Almanac, said the market has been fairly strong in the runup to November during midterm election years. Returns in September during those elections have resulted in gains of 3.84% since 1950.
“On average the vast majority of S&P 500 gains are from late September to midterm Election Day,” Hirsch wrote in a recent blog post.
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