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The September sag continued this morning as equity futures, which were higher overnight, steadily drifted lower to their lows of the session. The culprit this morning once again is higher yields where the 10-year yield has moved back above 4.5% even as the 2-year yield is basically flat. The threat of a government shutdown, which now looks increasingly likely, hasn’t helped either. Not all the news is bad this morning, though, as Hollywood writers have reached a tentative deal, and even the UAW has announced progress in talks with the Big 3 automakers.
There’s still a week left in the month that can’t end soon enough, but if you think this September’s 4.2% decline has been bad so far, remember that last year at this time, the S&P 500 was down 6.6% and then fell an additional 2.9% in the last week of the month. The year before (2021), the S&P 500 was down 1.6% at this point (before falling 3.2%) in the last week, and in 2020, the index was down 7.5% month to date (MTD) through 9/23 before rebounding 3.9% in the last week of the month.
The chart below summarizes the historical performance since 1952 (when the five-day trading week in its current form started) of the S&P 500 in the last week of September based on how the index performed MTD up until the last week. Unfortunately for bulls, the weakest returns to close out the month have come in years when the index was already down by as much or more than it is now. In the 16 years that the S&P 500 was down 3%+ MTD, its median performance in the last week of the month was a decline of 0.67% with positive returns less than 40% of the time. That’s more than twice the decline of the next closest category (up 3%+) and is the only performance range where the index was up less than 40% of the time.
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