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Monthly Market Wrap: September 2021

Welcome back to the Monthly Market Wrap from YCharts, where we break down the most important market trends for advisors and their clients every month. As always, feel free to download and share any visuals with clients and colleagues, or on social media.

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“Dow drops 600 points”; “U.S. futures plummet”; “NASDAQ accelerates losses, down 2.8% into the close”. Whether you received the occasional iPhone alert containing sour headlines like these or followed the markets closely, you know September was not a positive month for stocks. As of month’s end, the Dow is off 5.0% from its all-time high, while the S&P 500 is down 5.1% and the NASDAQ is 6.0% away from its highest-ever level.

But how much doom and gloom is there really? Since May 2015—the last time the three major US indices achieved simultaneous all-time highs since early 2000—there have been many retracements mixed in with the record highs:

Drawdowns for the Dow, S&P 500, and NASDAQ from 2015 through 2021

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While paying attention to sudden declines like these is critical, it also goes to show that despite how bleak investor sentiment feels at any given time, the sky might not be falling after all.

As investors shut the book on Q3 and look ahead to the final push of 2021, we’ll stop to examine these key developments from September:

Off the YCharts! How Expensive is the American Dream?

Major Index Returns: US Indices Take Big Tumble

Sector Movement: 10 of 11 Negative, Energy Sole Leader

Hot Stocks of the Month: There’s Energy Everywhere

Laggards & Losers: Regulation, Supply Chain Issues Hit Cyclical Names

Economic Data: Unemployment Claims Rise While Job Openings Reach Another High


Off the YCharts! How Expensive is the American Dream?

Arguably the most essential pillar of “The American Dream” is owning a home. Especially for first-time buyers, signing the deed to a house and calling it home is a monumental step in life. However, recent data shows home prices and inventory have grown while actual sales have slowed:

US Housing Market data from 1999 through August 2021

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Despite the number of new single family houses sold (light purple line on chart) being down 24.6% from its relative high in August 2020, the US Median Sales Price for New Houses Sold (dark purple line) has climbed to an all-time high, while US New Single Family Houses for Sale (blue line) are at their highest level post-2008. The market for existing homes has also been impacted—as the Median Sales Price of Existing Homes (dark orange line) nears an all-time high, Existing Home Sales (light orange line) are 12.6% lower than its post-2008 high from October 2020. Even as supply grows, the housing market is cooling in the wake of increasing prices, suggesting that prospective buyers currently view the price of the “American Dream” as too high.


Major Index Returns: US Indices Take Big Tumble

Major Index Returns for September 2021

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The “September Effect” refers to historically weak market performance during the namesake’s month, and September 2K21 was no different. The S&P 500 fell 4.7%, while the NASDAQ tumbled 5.3% as many headlines indicated tech shares were poised to suffer the most from rising yields and the Fed’s monetary tapering. The September Effect was felt globally as well, with International Developed Markets slipping 2.8% and MSCI Emerging Markets taking a nearly 4% hit. High-yield corporate bonds were the sole buoy of September, finishing the month unchanged, as the Global Aggregate Bond Index dove 1.8%.


Sector Movement: 10 of 11 Negative, Energy Sole Leader

SPDR ETF Sector Movement, September 2021

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With the exception of Energy, no sector was safe in September. Energy stocks surged 9% on the back of rising oil prices—through September 27th, WTI crude oil rose 7.3%, while Brent got a 4.1% lift, likely due to increased demand in disaster-hit areas and as a result of fuel & trucker shortages in the United Kingdom. Cyclically sensitive sectors such as Materials and Real Estate were hit hardest, sinking 7.2% and 6.3% respectively, along with defensive groupings like Communication Services and Utilities. Surprisingly, Technology was far from being September’s biggest laggard, despite the tech-heavy NASDAQ declining the most out of all major indices.


Hot Stocks of the Month: There’s Energy Everywhere

Top ten performing S&P 500 stocks for September 2021

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In case the sector returns chart, the title of this section, and the list above haven’t already given it away, September was energy’s month. Eight of September’s top ten stocks were energy names: Cabot Oil & Gas (COG), Diamondback Energy (FANG), ConocoPhillips (COP), Devon Energy (DVN), EOG Resources (EOG), Marathon Oil (MRO), Occidental Petroleum (OXY), and APA Corp (APA) all posted double-digit gains as crude oil prices surged in light of increased demand.

Fertilizer producer CF Industries Holdings (CF) and Silicon Valley-based start-up funding bank SVB Financial Group (SIVB) also made the cut for September’s ten best performers.


Laggards & Losers: Regulation, Supply Chain Issues Hit Cyclical Names

Worst performing S&P 500 stocks, September 2021

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Five consumer cyclical companies made September’s Laggards & Losers list, and for varying reasons. Las Vegas Sands (LVS) and Wynn Resorts (WYNN) dropped 18% and 16.7% respectively in light of Macau tightening regulation on its gaming industry. Both resort & casino conglomerates suffered several analyst downgrades due to their exposure in the region. Apparel manufacturer Under Armour (UAA) was down 12.8% and retailer Gap (GPS) fell 15.1% as supply chain issues hampered the industry, problems that were first reported by competing apparel maker Nike (NKE). Also affected by the supply chain crunch was FedEx (FDX). Shares plummeted 17.5% as the global shipping & logistics provider endured a total of 16 price target cuts in September. Looking ahead to the upcoming holiday season, employee shortages and unprecedented demand still weigh heavily on FedEx.

Biogen (BIIB), Nucor (NUE), A.O. Smith (AOS), PulteGroup (PHM), and Enphase Energy (ENPH) round out September’s ten worst performers.


Featured Market & Advisor News

Fourth Largest Increase in EPS Estimates for S&P 500 Companies Since 2009 for Q3 (FactSet)

Upcoming IPOs to Watch and Recent IPO Performance (YCharts)

Powell says Fed taper could start ‘soon’, end around mid-2022 (InvestmentNews)

Morgan Stanley Sees Growing Risk of 20% Drop in S&P 500 (WealthManagement.com)

What 5 Measures of Market Valuation Are Saying Right Now (YCharts)

Vanguard ETF Dethrones State Street for Biggest Annual Inflow (FA-Mag)


Economic Data: Unemployment Claims Rise While Job Openings Reach Another High

Employment

August’s unemployment rate clocked in at 5.2%, falling for a second consecutive month and setting yet another pandemic-era low. Initial jobless claims ticked up to 362,000 as of September 25th, an increase of 11,000 since the end of last month. Job openings, however, continued their astronomical rise, reaching 10.9 million at July’s end.

US Unemployment Rate, US Job Openings, US Weekly Jobless Claims from December 2000 through September 30th 2021

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Production and Sales

US Retail and Food Services Sales rebounded from a down July, rising 0.7%, and durable goods new orders increased for the fourth-straight month, up 1.8%.

Housing

US New Single Family Houses Sold increased 1.5% in August, a positive figure for the second-straight month after plummeting in April, May, and June. Existing Home Months’ Supply stayed flat in August, at 2.6. As a result, the US house price index MoM change continued to cool from its April all-time high, but still rose 1.4% in August.

Consumers

Price and spending levels grew at consistent clips month over month. Both the US Consumer Price Index and consumer spending (PCE) rose by 0.4%, which are the same levels as July after adjustments.

 

Have a great October! 📈

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