Month in the markets: shares feel autumn chill

Driving losses were mounting fears of inflation, US Congress budget concern and Fed tightening expectations.

September was a disappointing month for US shares. The S&P 500 index started the month by posting a new all-time closing high. However, as the month progressed the index started to falter, closing the month down by 4.8%. That performance bought its year-to-date price return to 14.7%.

Other US indices also floundered. The Dow Jones Industrial Average lost 4.3%, giving it a year-to-date return of 10.6%. Small and mid-caps also struggled. The S&P MidCap 400 was down 4.1% for the month, bringing its year-to-date return to 14.5%, while the S&P SmallCap 600 lost 2.56% in September, giving it a year-to-date return of 19%.

Driving these losses were mounting fears of inflation, an ongoing budget deadlock in the US Congress and the anticipation of a removal of Federal Reserve liquidity.

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However, as disappointing as the losses were, the sell-offs were mostly orderly, says Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. He notes: “The damage was controllable, and the sells were orderly, with the worst one-day drop being -2.04% [for the S&P 500], on 28 September 2021.”

The S&P 500 index posted one all-time high in September. In comparison, it posted 12 in August. The index has now posted 54 all-time closing highs this year. It has also posted new closing highs in every month since last November.

Nearly every sector in the S&P 500 posted a loss. Materials led the way, losing 7.2%. That was followed by communication services, with a return of -6.6%. The only sector to post a positive return was energy, with a price gain of 9.4%, owing to skyrocketing oil and gas prices. This was a reversal of August, where all sectors posted a gain with the exception of energy, which lost 2%.

Every factor-based US index posted a loss, with the S&P High Yield Dividend Aristocrats leading the way with a loss of 5.10%. S&P 500 High Beta was the best performing, with a loss of 1.86%.

Elsewhere, returns were also mostly in the red. The S&P Europe 350 lost 2.87%, while the S&P Europe MidCap BMI and S&P Europe SmallCap BMI also all posted losses in excess of 4%. Meanwhile, returns from the S&P United Kingdom were flat.

Most sectors in Europe experienced losses in September, with the exception of Energy, up 14%. Financials were able to post a small gain of less than 1%. Real estate and utilities saw some of the biggest monthly losses, losing 7% and 9%, respectively.

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Beyond the US and Europe, most markets also posted monthly losses. The S&P Global BMI fell by 3.9%. While this was partly the result of the US’ large weighting in global indices, S&P Global ex/US BMI still saw a 3% loss.

Emerging markets struggled, with the S&P Emerging BMI down by 3.5%. Latin America suffered some of the biggest losses, with the S&P Latin America 40 down by more than 10%. Despite all the bad news surrounding the implosion of Evergrande (SEHK:3333) in China, the S&P China 500 outperformed with losses of just 2.1%.