Despite a rally over the last few trading sessions, U.S. stocks closed August in the red, with the S&P 500 Index ($SPX) and Nasdaq Composite ($NASX) falling 1.7% and 2.2%, respectively. The fact that September has historically been the worst month for markets likely brings little comfort for investors – and while the caveat remains that past performance is not indicative of future returns, it cannot be denied that market sentiments are currently not as positive as they were a couple of months back. Against this backdrop, investors need to be watchful of the dreaded “September effect.”
Notably, the Q2 earnings season turned out to be much better than feared, even as S&P 500 earnings fell for the third consecutive quarter. According to FactSet, 79% of S&P 500 companies exceeded earnings estimates in the quarter, which is above the 5-year average of 77%. Similarly, 45 S&P 500 companies provided better-than-expected guidance, which is the highest number since Q3 2021.
