September was brutal closing the month with a 9% decline in and slightly greater than 5% for the third quarter. The Nasdaq lost about 10.5% over the past month, bringing its quarterly loss to roughly 4%. Both indices had the worst September since 2008. September is historically the worst month of the year for the market.
The Dow Jones Industrial Average, the last soldier standing so to speak, also ultimately fell into bear market territory this month, falling nearly 9% in September and over 6% in the third quarter. Not only was this worst month for the Dow since March 2020, but it was also its worst September since 2002. Yep, that means this past month for the Dow was worse than September 2008 during the financial crisis.
While the outlooks for stocks and the economy are bleak, we’re not in a financial and market crisis like 2008 or a dot-com bubble-type crash that lasted from March 2000 to October 2002.
For the quarter, the real estate and communication services sectors performed the worst, falling over 11% and 12%, respectively. Consumer discretionary and energy were the only two sectors to finish out the quarter with gains of just over 4% and 1%, respectively. As for September, no sector managed to escape the carnage, with all 11 looking to close lower for the month, led to the downside by real estate, communications services, technology and utilities.
Earnings season is here in October and that will give us a real feel of how things are going. The July earnings season did not adjust expectations and companies were optimistic. Recently FedEx said the pain is greater than they anticipated. Ford had similar comments. I am not sure if they are the exception or the rule. We will know more as companies report earnings and offer prognostications for 2023.
In a recent publication T. Rowe Price stated that investors could have added U.S. equity exposure in their portfolios anywhere from three months before to three months after the absolute trough in all 18 market drawdowns greater than (15%) since 1929 and still enhanced returns. However, economic fundamentals matter—and high inflation and rising interest rates present a particularly challenging environment for risk assets. While we believe market timing is a fool’s game, we suggest that a little more patience may be required before increasing exposure to equities and other risk assets in the current market environment.
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