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Market Update for September:
Ride Out the Storm

Craig McAvinue By Craig McAvinue – 5 October, 2023

“The iPhone was not just a communication tool but a way of life.”

Stock and currency markets performance

September was a tough month for the markets, with most seeing moderate declines. Emerging Markets saw the biggest drop, due mostly to ongoing problems in China.

Market Update Blog - September 2023 Market-2

Data table is from Google Finance

And with falling markets, the USD again took on the role of safe haven, with upticks in the value of the greenback against other major currencies.

Market Update Blog September 2023 Currency

Data table is from Google Finance

The last quarter is usually the best one

Quarter four is now upon us. Historically the best performing quarter by a significant margin, the year’s final period has seen the S&P 500 finish in positive territory 80% of the time, with average gains of over 4%.

Despite the pull back in the last couple of months, 2023 looks like an average year in terms of growth: so far this year, the S&P 500 is up 11% compared to the average market return since 1957 of just shy of 12%.

Another positive quarter plus a nice “Santa Rally” might result in an above average return. This is a reasonable result given the success of inflation reducing measures. Although September saw a slight increase in overall inflation, at less than 4% we are a long way from where we were 12 months ago. Food and housing inflation components, seen as most relevant to the normal person, were both down.

Santa Rally

The power of the consumer

With the usual impact of quarterly earnings on share prices, depending on whether results were better or worse than expectations, the results of the industry giants can make a big difference to the overall market. This has been illustrated more so in recent times as the largest five companies in the S&P 500, tech giants Apple, Microsoft, Amazon, Alphabet and newcomer Nvidia (which is up over 200% this year) now account for 22% of the value of the index.

big five tech

The power and size of these giants was illustrated to me earlier this week. I’m hardly someone who follows the latest trends, but I was due a new phone and with Apple having recently launched the iPhone 15, I figured I may as well buy the latest model. It turns out that since I had not pre-ordered, I’ll need to wait nearly a month to make this roughly $1000 purchase. A little further investigation revealed thousands of people who not only pre-ordered the latest iPhone, but will also show up at the store hours before opening to get their hands on their gadgets.

The power of consumerism is incredible and companies like Apple are able to harness it to drive unprecedented growth. For the year ended 30 June, 2023, Apple’s revenue was US$383,000,000,000. To put this into perspective, the company made $728,000 a minute, over $12,000 as second … astonishing numbers. And Apple is merely number nine on the list of highest earners; Walmart makes almost double that.

Some analysts in the industry subscribe to the concepts of Cyclical and Seasonality Investing. Historically, since 1930, there have been 12 years when January – July S&P 500 gains in excess of 10% were followed by a losing period in the months of August and September, as we have seen this year. In each of those years the fourth quarter saw gains of at least 2%, with an average quarterly return of 8.4%. The question for the bulls is whether we will see history repeat itself by repeating this cycle.

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