The S&P 500 is having a great year. What the story says happens next.
The stock market generally performs badly in September. This year could be different, precisely because stocks have already risen a lot for the year.
September is generally one of the worst months of the year for the stock market, but stocks do better when they have already done well. In the years dating back to 1928, the average September return for the
was a loss of 0.99%. This makes the month much worse than May, which ranks second in sluggishness for investors with an average loss of 0.11%
History indicates that September 2021 could be a good month for stocks. Since 1928, when the S&P 500 rose more than 13% in the first six months, the median index gain in September was 1.4%, according to Fundstrat. Until June of this year, the general market benchmark rose 14%.
The index rose in September in 63% of the years the market advanced from January to June, while it fell during the month in 54% of the years during this overall period.
The recent rise in the stock market has raised hopes that the index will perform well for the remainder of the year. Wells Fargo strategists recently raised their target for the S&P 500 to a level that reflects a rise of more than 6% from the index’s current level. They say in years when the index records double-digit percentage gains for the first eight months, it goes up another 8% to cap the year. The data goes back to 1990.
The index closed on Thursday at 4,522.68, ending August with a 20.4% year-to-date gain.
Just be aware that the climb can be bumpy. The S&P 500 hasn’t fallen more than 5% this year. With several risks on the horizon, including a corporate tax hike that could cut the S&P 500’s overall earnings per share by 5%, stocks could take a correction.
“The markets are overbought and should suffer a pullback,” writes Tom Lee, head of research at Fundstrat. Don’t be surprised to see the market gain a little more.
Write to Jacob Sonenshine at [email protected]