With the excitement of August over and the rise and fall of gold almost behind us, many are looking to September for clues to the future health of the economy. Last week alone, we saw major US indices produce their best weekly gain of the last two months. Historically, however, September has been one of the most volatile months in the year with frequent swings from high to low percentages above 10%. September also historically sees poor performance for equities on the S&P 500.
S&P's chief investment strategist, Sam Stovall, believes that volatility of this kind should be considered the "?new normal," observing that "?the market is currently about three times more volatile than it was in the past." Dips and spikes beyond 2% on the S&P 500 have occurred, on average, 5 times a year between 1950 and 1999; since then, advances of this nature have occurred 12.5 times per year and dips have occurred 14 times per year.
S&P's chief technical strategist, Mark Arbeter, has also publicly voiced his optimism for the near to intermediate future, stressing the need for more price gains to complete "?a bullish reversal for stocks."
The S&P 500 noted that stocks in general had fallen 10% in August"”the same month as the downgrading of the United States' triple A credit rating. So far this year, despite the 15% drop from the 52-week high for US stocks from 3 months ago, the S&P 500 has seen a fair number of successes with a number of stocks. Cabot Oil & Gas ranks highest on a list of best performers with total returns for 2011 of 84%. The vast majority of researchers give Cabot a favorable "?buy" or "?hold" rating. Similarly, National Semiconductor, despite being a technology stock, saw an 81.5% total return for 2011. Researchers are much more conservative here, though, offering a "?hold" rating in light of the company's impending acquisition by Texas Instruments, which was announced in April of this year.
In general, one can sense that the mood of investors is optimistic but tempered with caution as they wait to see how September will perform under the pressure of the events of the year thus far. As you welcome the start of the new month, make sure to track consumer confidence reports carefully as they may offer the strongest indicators about how not only local markets will fluctuate, but how international currency markets will evolve both in September and in the final quarter of 2011.