September Lived Up to Its Reputation; October Is Usually Kinder

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September Lived Up to Its Reputation; October Is Usually Kinder
Credit: © Reuters.

(Bloomberg) -- Global risk assets are likely to enjoy a far more favorable backdrop in the coming weeks, if historical patterns are a guide, after what is a customarily stormy month for investors.

With a day to go, September lived up to its reputation as a poor month for the S&P 500 , showing its worst performance since, well, last September. The MCSI Emerging Markets Index dropped 4.5% in the same period.

Especially China equity traders, tormented by months of turbulence, are desperately looking for catalysts. The National Day holiday, also known as “Golden Week,” could provide a gauge on how far consumption is from bottoming out, after strict virus controls dampened spending.

The benchmark CSI 300 index has suffered its worst quarter since March 2020, as Beijing’s crackdown on companies, China Evergrande Group’s crisis and a power crunch bruised stocks.

The good news for equity investors is that China-linked markets tend to stabilize or even recover during long Chinese holidays, historical trading analysis shows.

More broadly, over the last 10 years, emerging-market stocks have led an October charge posting an average 2.6% return, with shares in the U.S. and other developed markets also climbing. All three cohorts go on to extend those gains for the fourth quarter as a whole, with U.S. shares returning almost 5% on average, data compiled by Bloomberg shows.

Of course there’s a caveat: the much-discussed wall of worry markets need to climb from central bank tapering to debt ceilings to stagflation to possible changes at the top of the Fed. But risk assets have a solid seasonal foundation to start their ascent.

 

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