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Market Strategy 9/06/2022

  • John Stoltzfus
  • September 6, 2022

There's a Thorn Tree in the Garden

Bearish sentiment puts the summer rally to the test

Key Takeaways

  • Q2 earnings are essentially complete with just three companies still to report. With more than 99% of the names in the S&P 500 having reported, results continued to be stronger than expected.
  • Earnings in the June quarter are up 7.3% from a year ago on revenue growth of 13.7%. Some 75% of firms have reported earnings that exceeded estimates.
  • Last week’s employment and ISM reports showed continued resilience in the US economy, with business confidence in particular remaining positive. This could make the Fed’s job easier by allowing it to raise rates less aggressively while reining in inflationary pressure.
  • We look at equity market performance over the past 28 September periods, inclusive of 1994.
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Traders and investors in this Labor Day abridged week will look to economic data, corporate news as well as stateside and international political developments in searching for clues as to which direction the markets are likely to follow next.

By the end of last week stateside stock market action had seen bears having clawed back a little more than half of the S&P 500’s summer rally from its peak level on August 16.

It’s worth noting that it took a turn in sentiment from positive to negative a little over two weeks to give a haircut to the rally that began on June 16. A combination of hawkish tone in Fed Chair Powell’s remarks in Jackson Hole along with concerns about inflation, economic growth and corporate earnings in the quarter ahead served to curb market participants’ enthusiasm for stocks.

With Q2 earnings season pretty much in the rearview mirror (with 99% of the S&P 500’s companies having reported through last Friday) and Q3 earnings season not scheduled to get underway until mid-October when the big banks report, the “what have you done for me lately” market crowd are likely to carry more weight on the day-to-day near term and with their usual propensity for worry and negative projection.

Quotation from Aenean Pretium

We think it’s worth noting that of the 13 Septembers that delivered negative returns only 6 of those years saw the S&P 500 negative for the full year.

Fret and Dread in September?

We maintain that resilience evident in economic data (August jobs numbers for example) and in Q2 S&P 500 earnings and revenue results suggests that stocks are likely to consider the next leg of the wall of worry sooner than later despite near-term fret and dread that seems to have overwhelmed many investors and market observers. Such resilience points to the potential in our view for positive developments in data and news to offset negative developments over the course of this quarter and next.

As the month of September began last week much was made by market observers of how difficult the ninth month has proven to be for stocks over the years. So much was made of how bad the month of September was from a historical perspective that it sent us to the Bloomberg terminal to check the performance of the S&P 500 from dates inclusive of September 1994 (1994 being a year in which the “bite” of Fed tightening proved to be less than its “bark”) through the end of 2021.

What We Found in Septembers Past

Without a doubt September has historically earned market recognition for the volatility it can deliver. We found said rough patches looking back to 1994 can be caused by a variety of things including:

  • Fed rate hike cycles (1994, 2018) and
  • Recessions
  • A black swan event: the attack on the World Trade Center (2001)
  • Aftershock of a bubble bursting (Tech Bubble 1999)
  • Systemic crisis (The Great Financial Crisis 2008)
  • China currency devaluation (2015)
  • The last year of a Fed rate hike cycle (2018)

Including calendar year 1994 through calendar year 2021 we counted 13 Septembers that saw a negative return for the S&P 500 and 15 Septembers when the S&P 500 delivered a positive return.

We think it’s worth noting that of the 13 Septembers that delivered negative returns only six of those years saw the S&P 500 negative for the full year. In consideration of the aforementioned we think that while it’s not unreasonable to consider potential volatility in entering any September it’s not necessarily a determinant for how the S&P 500 will perform in that month or for that matter how the benchmark will perform for the calendar year.

Entering this September we recall the words of Mark Twain, “History doesn’t repeat itself, but it often rhymes.”

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John Stoltzfus


Chief Investment Strategist, Oppenheimer Asset Management Inc.

John is one of the most popular faces around Oppenheimer: our clients have come to rely on his market recaps for timely analysis and a confident viewpoint on the road forward. He frequently lends his expertise to CNBC, Bloomberg, Fox Business, and other notable networks.

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