September is often a bumpy month for equity markets
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Current market commentary
The recent rebound in equity markets has been almost as swift and pronounced as the sell-off in early August. Reassuring words from central banks, positive economic surprises, increased support from share buyback programmes and a return to low volatility were the drivers of the recovery rally. This trend could continue in the short term – not least because, ceteris paribus, systematic strategies will have to buy more equities again in the coming days. By mid-September at the latest, the risk of a setback in the equity markets is likely to increase again. Many companies will then be back in the blackout period and will not be allowed to carry out share buyback programmes as the Q3 reporting season approaches. In addition, the US presidential election is likely to become more of a focus for investors, with the first televised debate between Kamala Harris and Donald Trump taking place on 10 September. In addition, the last two weeks of September are seasonally the slowest of the calendar year.
Short-term outlook
After last Friday's Jackson Hole meeting, markets are now looking towards central bank meetings in September. The ECB meets mid-month on the 12th, followed by the US Fed and the Bank of England on the 18th and 19th. US markets will be closed on 2 September (Labour Day).
In the coming weeks, investors will be watching out for August inflation data, US employment data and the final August purchasing managers' indices. Today sees the release of the German Ifo Business Climate (Aug.) and the US Preliminary Durable Goods Orders (Jul.). Tomorrow will bring the German GDP figures (Q2) and the US Conference Board's Consumer Confidence (Aug.). Thursday will see the release of US GDP (Q2) and initial jobless claims (Aug. 24). On Friday, the focus will be on preliminary eurozone inflation data (Aug.) and the US PCE deflator (Jul.). The following week will see the release of the US and Eurozone PMIs and US employment data.
September is often a bumpy month for equity markets
- September is historically a difficult month for equity markets. On average, the second half of September is the worst period of the year - and the first half is not much better. The proportion of positive observations since 1930 is also particularly low at just 45%.
- In addition to the statistics, the rising tensions in the US election campaign also argue for bumpier markets. The contrasting positions of Harris and Trump (e.g. on taxes or foreign policy) could lead to more volatility.