These days, the stock markets, both local and international, are gradually showing signs of instability due to the growing uncertainty among investors, who have been closely following issues such as the resurgence of inflation in some countries in Latin America and Europe, the decisions of the Fed in the United States and the possibility that the slowdown will continue longer than desired.
Although the signals and results have been better than expected, there is still caution among decision makers, so the flow of capital continues, although for the moment at a slow pace, a situation that is undoubtedly reflected in the stock market data for the first days of September, with which It is predicted that this may be a month of little movement and strategies focused on waiting.
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A recent report from Pepperstone, a firm specialising in stock market investment services, notes that the US stock markets have started September on the wrong foot, confirming its reputation as the worst month of the year for stocks.
“On the first trading day of the month, the S&P 500 index registered a fall of 1.91%while the NASDAQ 100 plunged 2.9%. These results reflect the historically seasonal weakness of September, which has consistently been one of the most challenging months for investors,” they explained in the report.
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In this regard, Pepperstone strategist Quasar Elizundia explains that this weak start to September occurs in a crucial economic context, in which after the publication of the employment data (NFP) for July, the market’s attention has shifted mainly from the inflationary front to the state of health of the US economy.
“Historically, September has been the worst-performing month for the S&P 500, with negative average returns dating back to the 1970s. Over the past five years, the trend has been particularly adverse, with significant declines in 2022 (-9.3%) and 2021 (-4.7%). Although The September effect does not guarantee falls, it is important to highlight this pattern,” said this expert.
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Elizundia added that economic activity is currently the main focus, with the focus on the Federal Reserve’s decision on rate cuts, which could range between 25 and 50 basis points by mid-month. He also said that it is not unreasonable to think that there will be little movement in the coming weeks, as caution continues to reign.
“This week is full of relevant economic data that could define the direction of monetary policy. The manufacturing PMI index has started the week showing contraction for the fifth consecutive time. The JOLTS jobless data and the non-manufacturing PMI, which are expected to deteriorate from July and August levels respectively, will be closely watched by the markets,” he added.
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However, Quasar Elizundia was emphatic that the key data will be the NFP, which will probably determine the magnitude of the rate cuts, with a special focus on the unemployment rate and that if it fails to fall below 4.3% or if it accelerates, it could decisively influence the Federal Reserve’s decision towards a greater magnitude of easing.
That said, he concluded by saying that September has begun with a pessimistic tone for the equity markets in the United States, in line with its negative history and that the combination of seasonal factors and a crucial week from an economic point of view suggests that investors should remain cautious. Stay tuned for key economic data to be released in the coming months. days.
