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Market Insider: September 13, 2022

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U.S. Money Reserve

Sep 13, 2022

September has historically been the worst-performing month of the year for the Dow Jones Industrial Average and the S&P 500 since 1950, according to reports by MarketWatch. As the final quarter of 2022 approaches during a time of significant volatility, consumer portfolios could be exposed to new market risks.

In the coming week, markets could be at risk of further danger.

September and October have both been historically weak months for stock performance. Since 1897, the Dow Jones has produced an average loss of 1.13% in September, while it has produced an average gain of 0.77% the rest of the year. October is notable for having some of the largest stock market crashes in history, including “Black Monday” in 1929 and 1987, as well as the “Panic of 1907” and 1929’s “Black Tuesday.” Because of these historic trends, analysts use phrases like “the October Effect” and “the September Effect.”

The next meeting of the Federal Reserve in late September could lead to a further selloff of stocks. Hawkish comments from both Federal Reserve Chairman Jerome Powell and Federal Reserve Vice Chair Lael Brainard indicate that another 75-basis point (or .75%) rate hike could come at the conclusion of the Federal Reserve’s September 20–21, 2022, meeting. Rising interest rates can impede economic growth, which can in turn hamper stock market growth.

Close-up of downward-trending stock data chart

Stocks could still be in a bubble according to several analysts.

Michael Burry, best known for calling the subprime mortgage crisis in 2008, has drawn comparisons between current market conditions and those during the 2000 tech bubble crash and the 2008 housing bubble crash. In a tweet published on September 7, 2022, Burry wrote, “Stocks have not hit bottom yet.”

Jeremy Grantham, the co-founder of Boston asset manager GMO, says stocks are in a “super bubble” that has yet to crash. In a note published on September 7, 2022, Grantham called the rally in equities from June 2022 to August 2022 a bear market rally and claimed that stocks, bonds, and housing are still overvalued.

Two men comparing stock charts and data

Market risks might lead to a market crash.

NYU economics professor Nouriel Roubini has warned that a “historic market crash” is on the horizon. During an online seminar on September 1, 2022, Roubini expressed concern about a “stagflationary debt crisis” because “you have the worst of the ’70s in terms of supply shocks, and you have the worst of the global financial crisis because of too much debt, and that combination is dangerous.”

Strategists at Deutsche Bank also have expressed concern about a market crash. In a note published on September 7, 2022, strategists led by Binky Chadha wrote that in the event of a recession, stocks could slide 25% lower.

Read U.S. Money Reserve’s “Market Insider” each week for more economic insights. Nothing herein should be considered as portfolio or retirement advice as U.S. Money Reserve (“USMR”) cannot and does not offer financial advice. Clients should consult a financial advisor for specific advice. This commentary is provided by USMR for informational purposes only and is provided on an “as is” basis without any warranty of any kind, whether express or implied. Your use of the information provided in this commentary is entirely at your own risk. In no event will USMR be held liable for any indirect, special, incidental, or consequential damages arising out of the use of information contained in this commentary.

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