S&P 500 faces scrutiny over historical September market trends

The S&P 500 index is facing scrutiny due to the ‘September effect,’ a historical pattern where the ninth month often yields negative average returns. Data dating back to 1928 shows the S&P 500 has lost an average of 1.1% in September, while other datasets suggest an average decline of approximately 0.7% since 1926.

Despite this reputation, recent trends offer a more nuanced view. Over the last two decades, the S&P 500 has actually seen gains in more than half of the September periods (11 out of 20 cases), including the last two years. While 2022 saw a significant correction of over 9% in September, other pre-election years have shown better performance.

Market analysts are currently monitoring several factors, including the rise of 10-year US Treasury yields toward 4.8% and key support levels for the S&P 500. While stock valuations remain near 10-year averages relative to projected earnings, there are questions regarding the optimism embedded in future profit forecasts.