September Market Update

By Ryan Gilmer, CFA, CMT Chief Investment Officer

October 1, 2020

Here is a recap of market performance for the month of September and year-to-date:

September and year-to-date equity returns were opposites of each other. For the year, the S&P 500 has outperformed international and small cap stocks. During September, the S&P 500 trailed them both. Bonds were the best performer last month, and also for the year.

This graph shows the performance of the S&P 500 this year:

This is called a “candlestick chart” because the representation of each trading day looks like a candle. While it may take a minute to interpret, these charts are helpful because they show a significant amount of information from each trading day:

  • Color of the candle: a black candle indicates a down day, and a white candle indicates an up day.
  • The size of the candle: the top and bottom of each rectangle show the open and closing prices of the day. On an up day with a white candle, the close is the top of the rectangle and the open is the bottom. The opposite is true on a down day.
  • The wick: This line shows the highest and lowest prices of the day. 

Since the S&P 500 bottomed in March, we have seen four pullbacks in the market, of varying severities and lengths, indicated by the red circles on the chart above.

  • March 26 – April 1, down 7.19% in 4 trading days
  • April 29 – May 14, down 6.37% in 11 trading days
  • June 8 – June 15, down 8.27% in 5 trading days
  • September 2 – September 24, down 10.55% in 15 trading days

Every one of these corrective periods happened quickly, and was followed by forceful rallies which led the market to new highs. Here are some ways you can deal with down days in the markets:

  • Just ignore them – Remember that your time horizon is years, not days. Even though they seem intimidating when they happen, in the big picture, these corrections are simply a blip on the radar.
  • Invest more money – If you have the option (and can afford to), you should be investing money in your company retirement plan. Otherwise, consider a simple rule of thumb: make some contribution into your accounts any time the market is down 10% from a recent peak. This gives you an advantage when markets bounce back.
  • Rebalance your holdings – This is something we do for you. When market volatility increases, it’s a great time to make trades: buy more of what’s decreased in value, and sell some of what’s gone up in value. We used the period of volatility that September brought us as an opportunity to do this for our ETF strategies.

Market corrections are a very normal part of investing, even in strong upward markets. While the one we’re in right now pales in comparison to what we saw in March, it’s worth developing a strategy for handling these pullbacks. As always, please reach out to your advisor if you would like to discuss your accounts in further detail.

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