The S&P 500 Index has achieved a significant milestone, closing for the 100th consecutive session without experiencing a drop of at least 1.5%. This level of resiliency has not been seen in the past five years. While the stock market has had four losses exceeding 1% since reaching its peak earlier this year, daily fluctuations have been relatively muted, reminiscent of levels last seen in 2018.
One contributor to the market’s resilience is the belief that the economy has weathered the Federal Reserve’s policy tightening. Additionally, investors continue to pour money into stocks, with US exchange-traded equity funds receiving a net inflow of $13.4 billion in the week ending September 13th, marking the ninth week of additions in the past 12 weeks.
According to Thomas Martin, a senior portfolio manager at Globalt Investments, the absence of significant reasons for large drops in the stock market has also played a role in maintaining investor confidence. Unless the Federal Reserve surprises investors this week, repositioning is unlikely as rate hikes are anticipated to be nearing completion.
Although the S&P 500 has experienced minimal gains in September and closed Monday with little change, investors remain optimistic. Consumer spending remains strong, and there are indications that price pressures are subsiding. As investors eagerly await a key Fed announcement on Wednesday, the S&P 500 index has gained 16% in 2023.
However, rising oil prices, reaching their highest levels since last year, could present challenges to the Federal Reserve’s fight against inflation. Should the economy fail to cool enough to slow the rate of inflation, Chair Jerome Powell has expressed openness to further rate increases.
Looking ahead, historical data suggests that the S&P 500’s September performance may not be promising. Typically, the market has reached its September peak around the 11th trading day of the month. From mid-September to the end of the month, the average decline has been approximately 2%. Geopolitical concerns and rising energy prices may challenge the current downward trend in inflation.
Overall, although US stocks have shown resilience, there are cautionary signs that indicate a potential slowdown in performance for the remainder of September and into October.