September Lived Up to Reputation, October Often Kinder for Risk
(Bloomberg) -- Global risk assets are likely to enjoy a far more favorable backdrop in the coming weeks, if historical patterns are a guide, after what has been a stormy month for investors.
September lived up to its customary reputation as a poor month for global stocks, which posted their worst performance since March 2020. The MSCI AC World Index fell 4.3% with U.S. shares weighing heavily -- the S&P 500 Index slumped almost 5%.
Especially China equity traders, tormented by months of turbulence, are desperately looking for catalysts. The National Day holiday, also known as “Golden Week,” could provide a gauge on how far consumption is from bottoming out, after strict virus controls dampened spending.
China’s most widely followed stock benchmark is nursing the worst relative returns in two decades, setting up a challenging final quarter for investors seeking to end the year in the black. Beijing’s crackdown on companies, China Evergrande Group’s crisis and a power crunch have all hammered sentiment.
The good news for equity investors is that China-linked markets tend to stabilize or even recover during long Chinese holidays, historical trading analysis shows.
More broadly, over the last 10 years, emerging-market stocks have led an October charge posting an average 2.6% return, with shares in the U.S. and other developed markets also climbing. All three cohorts go on to extend those gains for the fourth quarter as a whole, with U.S. shares returning almost 5% on average, data compiled by Bloomberg shows.
Of course there’s a caveat: the much-discussed wall of worry markets need to climb from central bank tapering to debt ceilings to stagflation to possible changes at the top of the Federal Reserve. But risk assets have a solid seasonal foundation to start their ascent.
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