3 Reasons Why Stock Investors Should Brace for a Stormy September

investing.com:

With just two trading days left in August, Wall Street’s three major indexes are on track to end the month with losses as fresh uncertainty surrounding the Federal Reserve's rate plans rattled investors.

Through Tuesday's close, the blue-chip Dow Jones Industrial Average and the benchmark S&P 500 are both off by about 2%, while the tech-heavy Nasdaq Composite is down 2.8% and is slated to book its worst monthly decline since December 2022.

As a stormy August comes to an end, history says investors should brace for further turmoil in September, which is the worst month of the year for the stock market on average. Some have dubbed this annual sell-off as the «September Effect.»

Since 1897 — the first full year of the Dow Jones Industrial Average’s existence — the blue-chip index has suffered an average loss of around -1.2% in September. That compares to an average gain of roughly +0.8% for the other months of the calendar.

The Dow sank almost 9% last September as investors worried about the Federal Reserve’s aggressive rate hike plans to combat soaring inflation.

Source: Hulbert Ratings

Meanwhile, the benchmark S&P 500’s average September return dating back to 1928 is negative -1.1%, also the worst of any month of the year. That includes a 9.3% plunge in September 2022.

Source: Dow Jones Market Data

The same is true for the Nasdaq 100 Index, which has declined by an average of -0.8% in September over the last decade — the only month of the year with a negative return. The tech-heavy index sank 10.6% in September last year.

Source: Bloomberg

With investors continuing to gauge the outlook for interest rates, inflation, and the economy, a lot will be on the line in the weeks ahead. As such, here are three key dates to