Labor Day is almost here and some ETF traders are already hunkering down for September, historically the worst performing month for equities since the turn of the last century.
The S&P 500 has dropped an average 0.7% in September since 1900, writes Sam Stovall, chief equity strategist for S&P Capital IQ, in a research note. Additionally, the month of September has marked the worst decline of all months in 1931 when it plunged 29.9%. [Cyclicals Lead Stock ETFs Above Their Trend Lines]
When looking solely at election years, the market’s performance in September has remained relatively flat since 1900, rising 15 times and dropping 13 times.
Nevertheless, Stovall points out that the median market performance has typically dipped in September as stocks fell in the few weeks ahead of the election before recovering and posting its yearly high in the final 50 trading days.
Stovall also believes that the markets may experience a heightened level of volatility.
“This year, however, investors’ anxiety meter will likely show an elevated ready as they are mindful of a variety of end-of-month events here in the States, combined with a September-loaded series of European elections, meetings and court-rulings that could have fortune-altering consequences,” Stovall added.
Looking ahead, investors will look to the Jackson Hole meeting on Aug. 31 for hints on further quantitative easing and from ECB President Mario Draghi on Sept. 1.
Additionally, Alec Young, S&P’s global equity strategist, points out several important dates to keep in mind: On Sept. 6, discussions on Spain’s need for additional funds is held. On Sept. 12, the Dutch will hold general elections that may even decide its membership within the E.U. and the legality of the European Stability Mechanism, or bailout fund, will be handed down. On Sept. 13, the FOMC meets to discuss further easing. On Sept. 15, a meeting on the ESM and Greece will take place.
For more information on the broad markets, visit our S&P 500 category.
Max Chen contributed to this article.