Stocks are entering what is historically considered to be their worst time of the year, and it could be a particularly difficult ride with the prospect of more Federal Reserve action hanging over the market. On average, the S&P 500 index fell 0.56% in September, following World War II, according to the CFRA. The index was negative 56% in September, but that helped the market average 0.9% gain in October. November and December were both positive for the S&P, with gains averaging 1 1.4% and 1.6% respectively, according to the CFRA. Stocks are leaving August with losses. The S&P 500 index, as of late Tuesday, is down about 3.5% for the month and is down more than 7% from this month’s summer high. The index was mostly flat on Wednesday. “I think we need a nice turnaround, maybe closer to 3,800,” said Sam Stovall, investment strategist at CFRA. He noted that the S&P 500 was up 17.4% from its June low before failing to break above the 200-day moving average on Aug. 16. The 200-day is the average of the 200 closing prices. last for an index or stock, and it is viewed as a positive momentum indicator if it can be crossed. “I think we can retest the lows and right now I think the lows will hold,” he said. The S&P index hit a low of 3,636 on June 17. This week, the index fell below its 50-day moving average for the first time since July 26. A road map many strategists have taken. outlined for 2022 is an example for the mid-range. – an election year in which the stock market sold off sharply in September and into October, before rebounding in the last quarter of the year. A negative September would match that forecast, and the Fed has added to the volatility with its hawkish stance. “I think right now, investors are questioning their core thesis,” Stovall said. He said Fed Chairman Jerome Powell in a speech at Jackson Hole on Friday discouraged expectations that the central bank will pivot and cut rates when it stops raising rates next year. New York Fed President John Williams reinforced that view on Tuesday, when he said the Fed would raise interest rates and keep them high to combat inflation. The Fed meets again on September 20 and 21, and the odds in the futures market suggest another three-quarter point rate hike at that meeting. Strategists expect volatility around upcoming employment and inflation data to help Fed officials determine whether to raise 0.75 percentage points or 0.50 percentage points, as some economists expected economy. Friday’s August jobs report could be very important. Economists expect 318,000 jobs to have been added, down from a strong 528,000 in July, according to Dow Jones. The consumer price index is also important, due out on September 13. “Ultimately what we’re looking at is how the Fed looks at incoming data. Employment is really the key indicator that allows it. they adjust to the level of hawk they want,” said Patrick Palfrey, senior equity strategist at Credit Suisse and co-head of quantitative research. August employment data is notoriously volatile. The ADP’s latest report, released on Wednesday, shows that only 132,000 jobs were added by the private sector. Julian Emanuel, head of equities, derivatives and quantitative strategy at Evercore ISI, writes: “Volatility is the key word… that makes Friday payroll so important. motion. “A lower-than-consensus report could help the stock market, but he adds a ‘hot number’ of 450,000 or more that could drive the stock lower.” The Fed will essentially set the stage for what the stock market will say Palfrey says. He added that the S&P 500 is currently trading at about 16 times earnings, down from 21.5. He noted that one barrier to the market would be earnings and that “they” have already started to slide. “Recession worries Palfrey said profits do actually drop when the economy goes into a recession, and that’s one of the big fears among investors. That could make the fourth-quarter market a little underwhelming. “What’s tough is the idea that a recession is brewing,” he said. A lot of industrial variables appear to be pre-recession.” While the monthly jobs reports were strong, the increase in weekly jobless claims could be an early warning of a recession. He added: “The idea that the environment has a pre-recession feel and that the Fed’s historical hawks, or that rising Fed rates often precede a recession, will remain part of the recession. discussed later this year and early next. That could make it harder for the stock to rally, especially if earnings are pressured and reverse, he said. the fixed income market, where rates are rising. The 10-year yield was at 3.1% on Wednesday, after spending most of July and August below 3%. moving higher, so the stock is likely to continue to probe the lower end of the range. After all, it’s September,” wrote Evercore’s Emanuel. The strategist said he expects volatility in both directions and he is not bearish. First, he expects natural gas prices in Europe. Europe could move higher, he also noted that an inverted Treasury yield curve, where the 2-year yield is much higher than the 10-year yield, could be a warning of a recession. , it took three years for a recession to occur after a yield curve inversion, Emanuel said: “What will be important will be whether consumers continue to spend, after the first ‘nearly normal’ summer. For the first time in three years, spending trends will decline. . There’s a jet of water in one part of the pond and it’s rolling all over the place,” he said. “If you believe we’re on the cusp of a recession, you’ll want to turn to quality stocks… healthcare, staples, defense field. Those are the areas where there is a better chance of performing.” Palfrey said high-quality technology with high returns is also an area he would look to, but in general the sector can be problematic. “I think technology is in a tough spot,” said. It goes back to what happens with interest rates. What happens to the cost of capital and basically what are their margins?” CFRA’s Stovall said the best performing S&P subsectors since the August 16 high are energy, Independent power and fertilizer producers Among the major sectors, only energy continued to rise after its mid-August high and was the best performer in August. S&P Energy Select Sector SPDR ETF , or XLE, reflects that sector and is up 3.9% in August so far and up 46% on the year.Stovall notes that energy, utilities, healthcare, and communications have historically been the best performing sectors in terms of advances in September These sectors have grown by at least 60% in September, since 1995. To date, the utilities sector has grown by more than 4%. Healthcare fell about 11% and consumer essentials fell more than 4% Evercore ISI warned that defensive deals could be overdue, especially in the utilities sector. li The only sector to hit new highs since June. Emanuel noted that the sector is overvalued and dividend yields are near a 20-year low. The Utilities Choice ETF Fund reflects that sector. Emanuel writes: “With the S&P 500 Utilities Index likely to be in a ‘double top’ near the upper end of the post-Pandemic trend channel, risk/reward is likely to lean more towards Risk, Less rewards,” wrote Emanuel.In the S&P sub-sector, footwear, restaurants and property-loss insurers were among the top performers in September, according to Stovall. of the market is higher 70% of the time, he added.