Major market concerns that kept investors away in September

This month, it all went a one-way street for market participants – bond prices dived, yields rose, the dollar surged, and stocks tanked. One big trade.

With two trading sessions left, September lived up to expectations. Historically, it is one of the worst months for stocks.

For example, the S&P 500 return in the past four September were: -3.92% in 2020, -4.76% in 2021, -9.34% in 2022, and more than -5% in 2023 so far.

However, optimism remains. The worst possible ten trading days started on September 16. It is almost over, according to historical data.

Also, the Q4 returns after a negative September should be positive. Hence, hope is there.

But what made this September so special that the stock market tanked? Here are some market concerns that are unlikely to go away that easily.

Concentrated gains

Only 30%-40% have beaten the index in most weeks this year. Also, most of those gains were made with a low trading volume. In other words, most investors trade the same stocks.

For example, the seven largest stocks in the S&P 500 index are up over 80% this year – much higher than the overall index. What happens if these seven stocks turn lower?

High valuations and high inflation

Most stocks are trading at sky-high valuations. That is particularly true considering the high interest rates in today’s world.

Moreover, inflation is stubbornly high. The recent surge in oil prices will likely trigger another move higher in the prices of goods and services. As such, the Fed will have all the incentives to stay higher for longer.