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"Beware: September's Historical Market Performance Deteriorates, Particularly Impacting Specific Stocks"

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Wall Street Braces for Historically Challenging September

Stock Market Performance Trends

According to data from CNBC PRO, Wall Street is heading towards what has historically been the most challenging month for stocks. Since the beginning of August, major averages have shown signs of weakness as traders grapple with underwhelming macroeconomic data, sparking fears of a market pullback. As of a recent Thursday morning, the tech-centric Nasdaq Composite has been the weakest performer among the three major averages this month, declining more than 2% in August. However, it still maintains a year-to-date increase of 33%.

September: A Tense Month for the S&P 500

CNBC PRO's analysis of seasonal data suggests more turbulence ahead. September has typically been the weakest month for the S&P 500, a trend that has become more noticeable in recent years. Over the past decade, the S&P 500 has seen an average drop of 1.53% in September, a steeper decline than the 20-year average drop of 0.52%. In both cases, September has been the worst performing month of the year for this benchmark index.

September's Impact on Technology Stocks

"September is a critical turning point in both the calendar and the market," says Jeff Hirsch, editor-in-chief of the Stock Trader's Almanac. This is typically when traders return to their desks after summer and begin to reevaluate their portfolios, aiming to secure gains for the quarter and prepare for potential tax losses. Historically, this has resulted in a particularly difficult month for technology stocks. Over the last decade, the tech sector has fallen 2.14% on average in September, making it the worst-performing sector in the S&P 500.

Performance of Key Tech Stocks in September

September has been the weakest month for tech giants like Apple and Google-parent Alphabet, which have seen average drops of 2.82% and 2.20%, respectively. For Amazon, September ranks as the 11th weakest month with an average drop of 2.59%, while for Meta, it's the 10th worst month with shares falling an average of 1.96%. Meanwhile, for this year's biggest AI beneficiary Nvidia, which has seen nearly 200% growth this year, September ranks as the 9th worst month, with a 10-year average drop of 0.54%.

Short-Term Decline, Long-Term Resilience

Despite these trends, Hirsch doesn't expect any long-term decline in the major tech stocks. He attributes this to these companies' consistent ability to deliver solid quarterly results. "After such significant growth and all the hype from AI and tech advances, it's just a bit of a pause," Hirsch explains. "I don't anticipate any September sell-off or any August-September sell-off that we're beginning to see to be sustained for technology."

Opportunities Amidst the Dips

In September, the best performers in the broader index have historically been industrial and healthcare stocks, which have outperformed the broader index despite falling 0.98% and 1.28% respectively. For traders, a dip over the next two months could present a buying opportunity. However, Hirsch advises investors to also prepare for any potential pullback. "September and October are a buying opportunity every year," Hirsch says. "Yes, use those dips to position yourself, but it's when people stop saying 'oh, buy the dip,' is when the dip is actually attractive to buy. Don't just buy the dip. Be prepared for it."

Hot Take: The Implications of September Market Trends for New Businesses

The historical market trends in September, characterized by a general downturn, particularly in the tech sector, pose significant implications for new businesses.

Strategic Financial Planning

Firstly, new businesses, especially those in the tech sector, need to be prepared for potential financial volatility. Strategic financial planning and risk management become crucial during this period. Companies should consider diversifying their portfolios to mitigate potential losses.

Opportunities Amidst Challenges

Secondly, despite the overall market downturn, there are sectors, such as industrial and healthcare, that historically outperform the broader index in September. This presents opportunities for new businesses operating in these sectors or those considering diversification.

Long-Term Resilience Over Short-Term Decline

Finally, while the short-term decline in September is a challenge, it's important for new businesses to focus on long-term resilience. Consistent performance and solid quarterly results can help businesses weather short-term market fluctuations.

In conclusion, while September's market trends present challenges, they also offer valuable lessons and opportunities for new businesses. By strategically planning, diversifying, and focusing on long-term resilience, new businesses can navigate these challenges and even turn them into opportunities.

Article First Published at: https://www.cnbc.com/2023/08/10/watch-out-septembers-poor-market-track-record-is-getting-worse-especially-for-certain-stocks.html

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