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September’s Historical Trends

FYI | Sep 05 2012

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 – September the worst month for equities
 – Mixed performance in commodity and forex markets
 – A bullish month for longer-term bonds
 

By Chris Shaw

[Note: The following refers to historical trends and does reflect specific predictions.]

The coming month may be a challenging one for equities, as Barclays Capital's analysis of seasonal trends indicates September is the worst month of the year for global equity markets. Seven of 15 major indices have their worst month of the year in September as measured by median returns, while nine of 15 record their worst month as measured by mean returns.

India's Sensex, the All Ords and the NASDAQ Composite may be exceptions this time around as odds of an advance this month according to Barclays are better than 60% for the first two and 54% for the latter. In contrast, the odds of the Dow Jones advancing is estimated to be around 36%, while Germany's DAX has a 38% chance and the Nikkei a 40% chance of closing the month higher.

September offers more mixed returns for commodities, as Barclays notes while base metals generally perform poorly both energy and precious metals outperform for the month. Gold in particular tends to do well, posting its best month of the year as measured by both median and mean returns.

Odds of gains this month according to the analysis of Barclays stand at 62% for gold and silver and 55% for West Texas Intermediate spot prices, while aluminium offers a 32% chance of gaining this month and copper a 46% chance.

In foreign exchange markets September returns are also more mixed, Barclays noting the EUR/GBP, EUR/USD, EUR/JP and AUD/USD currency pairs enjoy their best month of the year in terms of median returns while the USD/CHF, USD/JPY and EUR/NOK record their worst month of the year on the same basis.

Odds of an advance stand at 66% for the EUR/USD and the EUR/GBP pairs according to Barclays, while least likely to record a gain among the major currencies is the USD/JPY pair at just 41%. The Australian dollar is seen as having a 56% chance of advancing this month against the US dollar.

In contrast to equity markets, September tends to be a bullish month for longer dated bonds, Barclays noting none of the major 10-year and 5-year bonds offer odds of a yield increase this month of more than 50%. Odds for yield gains in Swiss, Australian and New Zealand 10-year bonds all stand at less than 30% according to Barclays.


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