The 10.7% rally in the S&P 500 from its June lows is stumbling as it runs into what has historically been the toughest month for the US stock market, sparking nerves among some fund managers of a broad sell-off in September.
The S&P has been in a bear market since plummeting early this year as investors priced in the expectation of aggressive Federal Reserve interest rate hikes, but the index has rallied strongly since June, regaining half its losses for the year.
That rebound has been fueled by a combination of strong earnings from bellwether companies and signs that inflation might have peaked, potentially allowing the Fed to slow rate hikes.
But as investors and traders return from summer holidays, some are nervous about a bumpier ride in September, due to seasonal concerns and nervousness about the Fed’s pace of hikes and their economic impact.
The S&P 500 fell nearly 3.4% on Friday after Fed Chair Jerome Powell reiterated the central bank’s commitment to taming inflation despite a possible recession.
“These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain,” Powell said in a closely watched speech in Jackson Hole, Wyoming.
September typically is a down month for the stock market because fund managers tend to sell underperforming positions as the end of the third quarter approaches, according to the Stock Trader’s Almanac.
“We’ve had a breathtaking run and I wouldn’t be shocked if the market takes a hit here,” said Jack Janasiewicz, lead portfolio strategist at Natixis Investment Management Solutions.
Published in The Express Tribune, August 28th, 2022.
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