Every September, Australians lose $30 billion. Is it about to happen again?
The Australian sharemarket started September in dreadful fashion, as the ASX200 shed nearly 1 per cent on Wednesday alone to hit a 20-day low.
While it rebounded and is flat for the month so far, for this time of year, the turbulence is an all-too-familiar story.
September is the Australian sharemarket’s worst month of the year. Bloomberg
September has long been the weakest time of the year for the local sharemarket, as well as those overseas.
Over the last 10 years, the ASX’s average performance for the month has been a $30.66 billion loss.
In 2020 – an admittedly tumultuous economic year thanks to the pandemic – the overall market capitalisation of the Australian sharemarket fell by $63 billion.
In 2023, the loss was almost $80 billion.
The year before, more than $175 billion.
“September has earned its reputation for being a torrid month for investors,” eToro lead Asia-Pacific analyst Josh Gilbert told nine.com.au.
“Over the past 20 years, it's the worst month of the year for the ASX 200, averaging a loss of around 0.47 per cent.”
Part of the carnage has been coincidental.
September has had its fair share of sharemarket-shaking events, going back far beyond the last decade.
This includes 2008, when the Global Financial Crisis went into overdrive when Lehman Brothers collapsed on the 15th, the 9/11 attacks in 2001, the dot-com bubble was still rocking markets in 2001, and the aftermath of Iraq’s invasion of Kuwait, including surging oil prices, in 1990.
More recently, 2021 saw Chinese real estate giant Evergrande miss crucial payments en route to its eventual collapse, and a year later unexpectedly hot inflation in the US had flow-on effects across global markets.
Several major global events have hit Australian investors hard in Septembers past. Getty Images
But it’s not just bad luck – there are structural reasons why red outweighs green as the colour of the month, many related to reporting season finishing up in late August.
“By the time September rolls around, most of the earnings are done, the guidance is out, and there are not many catalysts left,” Gilbert said.
“Stocks that disappointed during results can be sold off during September as fund managers reposition, while those that beat expectations may have already priced in the good news.
“The other part is that a big chunk of the market goes ex-dividend around now, so prices get marked down by the amount that's about to land in shareholders' accounts.
“That's something worth knowing because that’s not weakness in the market, it’s just the market paying you.”
Will it happen again?
No one knows for certain what the sharemarket will do in the coming weeks.
However, observers would be forgiven for hearing echoes of some of those major previous catalysts in today’s financial circumstances – high oil prices thanks to a Middle East conflict, concerns about a possible AI bubble, and bond yields at their highest level since the GFC.
“Sharemarkets are likely to remain volatile,” AMP deputy chief economist Diana Mousina wrote in a note last week.
“[There’s a] lack of any long-term resolution to the Iran War and hit to global oil supplies, stretched valuations, sticky inflation, political uncertainty associated with Trump and the midterm elections and worries about the impact of AI and whether there is an AI bubble.”
There are rising fears of another interest rate hike before the end of the year. Peter Braig/AFR
Locally, fears of another interest rate hike are increasing on the back of hotter-than-expected inflation and GDP growth, which Gilbert says will be felt across some sectors of the sharemarket.
“We're sitting near record highs after a reporting season in which the outlooks did more damage than the results, so there's not much margin for error,” he said.
“Seasonality certainly isn’t on the market's side this September, and neither are the fundamentals right now,” he added.
However, some analysts are predicting good news for traders; IG’s Troy Sycamore believes the ASX200’s all-time high set in August will be tested and possibly broken in the coming weeks, while Mousina said investors are likely to relatively content over the next year.
“Returns should still be okay for the next 12 months as a whole thanks to continuing economic growth with recession avoided and strong global profit growth and likely rate cuts next year,” she said.
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