It’s always great to start a letter with the words, “The markets finished the quarter at an all-time high.” Fortunately, that’s the case this time around. The S&P 500 rose 2% in September, and 5.5% for the entire quarter. The Dow, meanwhile, gained 8.2% in Q3. Both indices set new records along the way.
Why do September and October tend to be so volatile? Unfortunately, despite a lot of research on the subject, no one has found a single causal link that can explain it. (Certainly not one that repeats year after year.) However, there are plenty of theories about the September Effect. Here are three of the most plausible:
On August 2 alone, the Dow fell by over 600 points, and the NASDAQ entered into correction territory. This came on the heels of a similar slide the day before. The reasons for this drop are fairly simple to understand: A spike in unemployment, coupled with fear that the Federal Reserve has waited too long to cut interest rates.
Let’s say you’re preparing for a summer trip to the beach. What would you put in your suitcase? A swimsuit, probably. Sandals. Sunscreen. Plenty of shorts and t-shirts. Sunglasses and a hat. Then, when you take a step back, you realize you still have space for a few more items. What do you choose? More beach gear? Makes sense – after all, it’s the middle of summer, and your destination is famous for being the perfect place to work on a tan. When 2024 began, inflation was near its lowest point in two years. As a result, many investors figured prices would continue to drop, and the Federal Reserve would lower interest rates sooner rather than later. (And possibly even several times throughout the year.) In other words, they “banked” on warm weather and sunny skies, then packed their suitcase accordingly.
There are a lot of misconceptions that spring up every four years about what presidential contests might mean for your portfolio. Most of these cause investors to worry unnecessarily. As your financial advisor, it’s my job to help you feel confident in your financial future, not anxious. So, let’s do a brief dive into three misconceptions about election season and the markets.
Last year, the markets surprised many experts who had predicted a recession by having positive growth. That hot streak continued through the first quarter of 2024.