September has the worst track record for stocks but any pullback could be swift as investors watch the election
Stocks often stumble in September, and in election years, there’s potential for even more volatility.
The presidential election is a horse race with Democrat Joe Biden now holding a narrower 6.9 percentage point lead, from prior double digits, over President Donald Trump, according to an average of major polls on RealCearPolitics.com. While the outcome is still unclear, there is less concern than even a few weeks ago is that Democrats will sweep the White House and both houses of Congress in November.
“Labor Day is the point where the polls really start to matter,” said Barry Knapp, Ironsides Macroeconomics director of research. “If we were anywhere near they were a month ago, it would be a problem. Here we are a month later and it looks like Trump is going to win again...To me. it looks like the momentum is on Trump’s side.” Knapp said investors are betting in the derivatives market that there will be a lot more volatility in October and November, than in September.
“I think one of the bigger [events] could be the debate. That could change the poll numbers. I think the market would feel better about either Trump pulling ahead in the polls or the Republicans looking set to take the Senate,” said Jim Paulsen, chief investment strategist at Leuthold Group. “I think the vast majority of investors would not be happy that one party could get tri-power and have a free-for-all for two years on what they want to accomplish.”
September is often a weak month, and since World War II, the S&P 500 averaged a decline of 0.5%, according to CFRA. August is often a flattish month, but this year it is up about 7%, the best performance since 1984. Analysts said the market could ride August’s momentum, but it is getting overbought and could see a quick pullback before moving higher.
Reference: CNBC
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