What’s crazier: the stock market or Miley Cyrus’ attire at the MTV Video Awards?
I’d definitely vote for the stock market!
All of August has been a roller-coaster ride for investors. The broad U.S. stock market — thanks to China’s sluggish growth and the confused outlook for U.S. interest rates — experienced the first 10% drop in four years leading up to the most dismal monthly performance since May 2012.
Volatility was high. Just last Monday, the Dow Jones Industrial Average plunged 1,000 points followed by a more than 600-point rally a few days later.
September turned the pages on our calendars but hasn’t yet turned our frowns around.
The Dow entered the new month with a 470-point plunge on Tuesday only to be followed by a triple-digit rebound on Wednesday.
So, yes. It does look as if the tremendous volatility is here to stay for a while. And, to top it off, September has historically been the worst month for market performance.
According to data from the S&P Dow Jones Indices, the S&P 500 index has had an average decline of 1.03% in September for the past 87 years!
Though there is no precise reason behind the stock market’s so-called “seasonality,” traders and investors do not take past trends lightly. So this September is likely to witness some more market volatility.
This September also comprises what could be one of the Federal Reserve’s most awaited policy meetings since the bull market began in Mar 2009. The Fed could increase the short-term interest rates for the first time since 2006.
Low rates have been a key catalyst that triggered the stock price rise since the lows hit more than six years back. During this period, the U.S. stock market more than tripled in value in spite of one of the slowest post-recession recoveries ever.
So September is plagued with volatility, seasonal baggage and confusion over the Fed’s impending decision. Now that makes finding stocks to invest in particularly difficult.
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