The summer is almost over and September is just around the corner. But did you know it's not only a special month for students and teachers, but also for market analysts and traders?
The September Effect refers to historically weak stock market returns for the month of September. While many experts believe that such a calendar-based effect is merely a superstition, the fact - that it tends to affect investors' behavior - is worth noting.
For example, last year, even though the Federal Reserve was pumping trillions of dollars into the financial system and boosting asset prices, the S&P 500 declined by roughly -10% at the beginning of September and reached the previous level only in November.
If you take a look at the market data of the last 100 years, September has been the only month when the Dow Jones Industrial Average (DJIA) had negative returns. However, the effect is usually not overwhelming, so investors shouldn't expect that the market will crash every September.
In other words, some long term investors probably don't care about the “September Effect”, and some other traders might find it as an interesting opportunity to keep an eye on.
This year's potential catalysts
Even though the “September Effect” usually has no clear catalyst, having one or two candidates can increase the chances of it coming to fruition.
Currently, the Federal Reserve is starting to say comments that signal the end of tapering. So, the huge money inflow into the financial markets might be over, after more than a year since March 2020.
Another factor worth mentioning is that major market indices have doubled in price during the last year and a half, which might mark this as the fastest and highest bull run since World War 2. As a result, it may not be a surprise if big institutions took some profit at this point.
What instruments to watch out for?
Not sure if you want to trade it?
Market events can be exciting and scary at the same time, especially if you're just starting out.
This is where NAGA's community can help you – reach out to the community or post a question on the feed and get the conversations going. This is a great way to find someone who understands the events and whom you can potentially Autocopy.
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