Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: I'm Stephen Carol and this is Here's Why, where we
Speaker 2: take one news story and explain it in just a
Speaker 2: few minutes with our experts here at Bloomberg. Markets have
Speaker 2: their own seasons. Central bank decisions and company results may
Speaker 2: be key dates in the calendar, but just like for
Speaker 2: the weather, the month of the year can really matter. Well,
Speaker 2: the January effect is in full forces.
Speaker 1: I mean, August, there's nobody there, Volumes are out loads.
Speaker 1: It always tends to be a little bit of a
Speaker 1: bull at all time. Anyway, September though typically on average,
Speaker 1: not a good month for stocks.
Speaker 2: So January is traditionally a good month for the stock market.
Speaker 2: September's bad. Wall Street lower points to historical market crashes
Speaker 2: happening in October. But are these trends always born out
Speaker 2: in reality? And do money managers pay any attention to them?
Speaker 2: Here's why the calendar month matters to markets. Our Market's
Speaker 2: Life Managing editor, Christina Quino, joins us now for more.
Speaker 2: Hey Christine, what does the data tell us then about
Speaker 2: good and bad months for the markets?
Speaker 1: Well, Steven, I mean these are lore for a reason, right,
Speaker 1: and so we do have a history of certain months
Speaker 1: being particularly good or particularly bad for markets. So if
Speaker 1: we're talking about September specifically, there is quite a long
Speaker 1: history of this month just being a source of upheaval
Speaker 1: and volatility across asset classes. For instance, we've seen the
Speaker 1: S and P five hundred fall every single September since
Speaker 1: the nineteen fifty so that's quite a good bit of
Speaker 1: history there. And meanwhile, bonds have been particularly having a
Speaker 1: bad time every September for the last ten years, and
Speaker 1: gold as well has dropped every single September since twenty seventeen,
Speaker 1: And so there is a little bit of lore here.
Speaker 1: There is a little bit of history here, and I'm
Speaker 1: sure that's feeding into market psychology in addition to all
Speaker 1: the other real time catalysts that we're facing at the moment.
Speaker 2: Yeah, can we determine what it is that I suppose
Speaker 2: drives these trends or is it those last minute issues
Speaker 2: of those kind of surprises for markets.
Speaker 1: Well, I think it's a little bit of a combination
Speaker 1: of human psychology but also the cycle of markets throughout
Speaker 1: a calendar year, right, because the summer period, particularly over June,
Speaker 1: July and August, tends to be quite upbeat for markets.
Speaker 1: That's when we would get some of the summer season earnings,
Speaker 1: and those tend to be quite upbeat in terms of
Speaker 1: the outlooks for the rest of the year, and also
Speaker 1: just generally the mood and markets tends to be a
Speaker 1: bit more optimistic, probably because traders are off to their
Speaker 1: various vacations around the world and maybe a little less
Speaker 1: volumes and volatility, and so it doesn't really take much
Speaker 1: to drive markets, and oftentimes a direction of that drive
Speaker 1: tends to be higher. And so when we get into September,
Speaker 1: there's definitely this sort of back to school feeling that
Speaker 1: we get in markets, and so that's when traders come
Speaker 1: back from their vacations, they take a look at their
Speaker 1: books and then they realize, huh, maybe it's time to
Speaker 1: de risk in some assets and also reconsider some of
Speaker 1: their positions in their portfolios as they head into the
Speaker 1: final months of the year.
Speaker 2: So how do investors tend to deal with these broad
Speaker 2: trends on markets? Is there an argument for everyone just
Speaker 2: taking September off to try and avoid this.
Speaker 1: I'm sure people can take September off, they would, but
Speaker 1: the problem is they've already taken most of August off,
Speaker 1: and so September's kind of a return to reality for
Speaker 1: a lot of people in markets. The tendency for markets,
Speaker 1: as with any sort of big trend that's difficult to counteract,
Speaker 1: is sell first and ask questions later. And we've seen
Speaker 1: it time and time again, and I think that's what
Speaker 1: feeds into this lore of September being bad for markets
Speaker 1: as well, because that's kind of ingrained in market psychology,
Speaker 1: just because of the history that we've seen and how
Speaker 1: it has been quite bad for different asset classes over
Speaker 1: the last few decades. And this awareness again of the
Speaker 1: fact that there's only now a few months left to
Speaker 1: the year. That combination really just drives a lot of
Speaker 1: people in markets to de risk and rethink some of
Speaker 1: their positions and their views heading into the final push
Speaker 1: for the year.
Speaker 2: What are the sorts of events that can contradict these
Speaker 2: usual trends, the exceptions that prove the rule.
Speaker 1: Maybe there are exceptions in terms of kind of the
Speaker 1: year that we're having, right I think it depends on
Speaker 1: the vibe I suppose from various central banks and policy
Speaker 1: across the globe, and whether there's a particularly big event
Speaker 1: in a particular year like elections, for instance, tend to
Speaker 1: uphen some of these trends as well, just because there's
Speaker 1: that extra catalyst that investors are positioning for. These tend
Speaker 1: to happen, of course, toward the end of the year,
Speaker 1: at least when we're talking about US presidential elections for instance,
Speaker 1: which this particular year is. This is something that could
Speaker 1: potentially upset the historical trends that we've seen, just because
Speaker 1: it's another additional catalyst that investors have to consider in
Speaker 1: addition to the seasonal trends that we're already seeing this year.
Speaker 2: Of course the US presidential election, as you point out,
Speaker 2: but we're also in this very particular moment for central
Speaker 2: banks where we're very focused on the path of interest
Speaker 2: right cuts in some cases first interest rate cuts from
Speaker 2: big central banks. Is that the sort of thing that
Speaker 2: could mean none of the usual rules apply when we're
Speaker 2: thinking about seasonal trends in twenty twenty four.
Speaker 1: Well, it's certainly a factor that could be a wildcard seven,
Speaker 1: that's for sure, just because, as you mentioned, it's the
Speaker 1: first rate cutting cycle that we've seen in a while,
Speaker 1: and markets are very different now compared with just a
Speaker 1: few years ago, even just two years ago, they were
Speaker 1: contending with massive rate hikes from the Federal Reserve and
Speaker 1: various other central banks and runaway inflation. That's a very
Speaker 1: different picture now, right, there's the sense of inflation is
Speaker 1: mostly under control, and that's why center banks have that
Speaker 1: confidence to push toward rate cuts. But then the last
Speaker 1: time that we've seen rate cutting cycles as well slightly different. Right.
Speaker 1: These tend to come during recessionary periods, which arguably we're
Speaker 1: not particularly in at the moment, at least not when
Speaker 1: you look at some of the recent data out of
Speaker 1: the US and other major economies. Yes, there are signs
Speaker 1: of a bit of a slowdown in these various economies,
Speaker 1: but nowhere near that kind of large downturn that precipitated
Speaker 1: a lot of previous cutting cycles. And so you know,
Speaker 1: we are headed into another one this time around, and
Speaker 1: there are some similarity, some trends that you can point to,
Speaker 1: but it's a very different environment in terms of just
Speaker 1: the overall health of the global economy now versus in
Speaker 1: previous cycles.
Speaker 2: So it's worth paying attention to the month and to
Speaker 2: the year. Thank you very much, Christine Aquino, our Markets
Speaker 2: Live managing editor. For more explanations, like this one from
Speaker 2: our team of twenty seven hundred journalists and on us
Speaker 2: around the world. Search for Quick Take on the Bloomberg
Speaker 2: website or Bloomberg Business app. I'm Stephen Carol. This is
Speaker 2: here's why. I'll be back next week with more. Thanks
Speaker 2: for listening.