We're closing out September with poor returns for equity markets. That shouldn't have been a big surprise if you follow the seasonals I posted in late August.
In general, seasonals are more valuable than they're given credit for. They really shouldn't work in an efficient market but they do. At worst, they're another tool to have in the toolbox.
With that in mind, here's a great chart from Wayne Whaley who highlights that in years where stocks have been strong (S&P 500 still up 19% this year) and have a poor September (it's been a rough one so far), the fourth quarter tends to post strong gains. The pattern is a perfect 8 wins and 0 losses dating back to 1961 with an average gain of 8.56% from Oct 1 through year end.
On the fundamental side, I think we will need some clear softening in the US economy and undershoots in core inflation but it always looks bleak after a bad month.
