eToro: September - a volatile month; central banks prepare

September is statistically the weakest month of the year for financial markets, according to eToro analysts. They highlight that investors turned their attention to the Jackson Hole symposium over the weekend, seeking clues from central bankers about their outlook on the global economy and, in particular, whether they will continue to raise interest rates.

This year, the Chairman of the U.S. Federal Reserve, Jerome Powell, was more cautious about the economy in his speech, but signaled that he is not yet ready to halt interest rate hikes, notes Bogdan Maioreanu, an eToro analyst, pointing out that "Powell reiterated how serious the Fed is about the 2% inflation target, which it will not deviate from." The President of the European Central Bank, Christine Lagarde, arrived at a similar conclusion. The ECB is prepared to set interest rates at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to the 2% target over the medium term. However, both speeches emphasized that the next steps depend on data, especially labor market figures. The first day of September brings the U.S. job creation numbers.

Maioreanu explains: "September is usually the weakest month for financial markets, considering the end of summer, the time for mutual fund tax loss harvesting, and consumer spending on back-to-school. We've analyzed 15 of the world's largest stock indices, on average, over a fifty-year period. The typical September price performance has been a decline of 1.1%, by far the largest of the observed average decline in the three months. None of the analyzed markets have been positive. The largest decline was recorded for smaller and more volatile assets, especially the FTSE MIB in Italy, the DAX in Germany, and the FTSE 250 index of medium-sized companies in the UK. From a seasonal perspective, U.S. stock markets have been below the global average. The statistical drop in stock prices in September follows a historically weak August, with an average decline of 0.2%."

Among Romanian investors, 44% say they have planned to increase their portfolios in this quarter ending on September 30, according to the latest eToro Retail Investor Beat survey. So far, August has offered some stock price reductions, creating opportunities for some investors. But macroeconomic fundamentals continue to support the markets, with company profits recovering, decreasing inflation, and rising interest rates approaching their peak. The traditional "September weakness" may have already started in August, or the markets are gearing up for the typical fourth-quarter repositioning rally. However, the year-end offers a more positive picture - statistically, all three months of the last quarter present positive monthly returns, 0.9% in October, 1.2% in November, and December, with the highest yield at 1.8%.