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”Obsolescence is the very hallmark of progress.” – Henry Ford II
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What started as a weak start to September in the US spread to Asia overnight, followed through to Europe this morning, and is now back in the US this morning. That’s September for you! The big reports overnight and this morning were PMI readings for the services sector, and they mostly came in weaker than expected but still showed growth. Today’s major economic reports in the US are JOLTS for July and Factory Orders at 10 AM.
Yesterday’s 2.12% decline for the S&P 500 was the worst opening day for a month since May 2020, and the worst start to September since 2015. September is no stranger to big down days to start the month. Since 1953, the first full year of the five-day trading week in its current form, the S&P 500 has declined 1%+ on the first trading day of the month 14 times now, which works out to just under 20% of the time. The next closest months are October and January with eleven each.
In the table below, we summarize the performance of the S&P 500 following 1%+ declines to start the month grouped by month. Over the following day, week, and month, the S&P 500 tends to see steady gains overall, although returns when the decline occurs in September have been below average. One day and one week later, the S&P 500 was positive but up by just an average of 0.13% and 0.14%, respectively. Four weeks later, though, 1%+ declines to start the month of September have been followed by an average decline of 1.36% which is the worst four-week performance of any month except June.
The chart below shows the four-week performance following 1%+ declines by month. Here you can really see the weakness that follows these types of declines during the summer months, but outside of the June to September period, 1%+ declines to start the month have been followed by an average four-week performance of 1% or more.
While the four-week performance of the S&P 500 following a 1%+ decline to start September has been weak, performance following recent 1%+ declines have been positive. The chart below shows the performance of the S&P 500 in the four weeks following the last 20 1%+ declines to start the month, and after each of the last eight occurrences, the S&P 500 has been up four-weeks later every time for a median gain of 4.6%.
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