US stock indices experienced a troublesome September. Can it get worse shortly?

If you have US stocks in your investment portfolio, you’re probably relieved that September has finally ended. It was the worst month for the market in 2023. Let's delve into the reasons behind this and see if investors' concerns have truly subsided.

The key data we're focusing on in this piece are the US stock indices – the S&P 500, the Nasdaq Composite, the Dow Jones Industrial, all these legends, you know. The S&P 500 lost nearly 5%. 

The Nasdaq Composite experienced an even more severe drop than the S&P 500 – a 5.5% decline in September.

The Dow Jones Industrial showed somewhat better performance compared to its counterparts, as you can see.

Seeing red figures next to your stock holdings can be a bit frustrating. However, there are always exceptions that perform well when the overall market is declining. To find out which stocks are trending today, you can monitor the page featuring top stocks gainers.

It's also worth noting that September has historically been a tough month for the US stock market. This phenomenon even has its name – the September Effect. It’s hard to establish the reasons behind this recurring phenomenon. It could be due to investors returning from summer vacations and reacting more vehemently to negative news. Or perhaps we are just talking about a self-fulfilling prophecy.

Nevertheless, there were obvious factors affecting the dynamics of indices. Here’s pretty simple logic: when the US Treasury bond yields reach their highest levels in the past 16 years, there is no reason to invest in risky assets. Simultaneously, the Federal Reserve is considering raising interest rates, energy prices are on the rise, and people have less disposable income for investing.

Let’s try to find some drivers for the US stock indices. The main opportunity to reverse the trend appears to be the upcoming earnings season. Strong financial reports from US companies could potentially change the trajectory. But for how long? Some analysts believe the September drop was only the beginning of more scaled falls associated with a potential recession. And in this case, tech companies might be on a razor-edge.

Regardless, it's essential to remember that your trading decisions should be based primarily on your own analysis and opinions. Analysts have made various predictions about the market's future drop, and take a look at Nvidia, for example. So, conduct thorough research before buying or selling any assets.