A handful of market watchers correctly surmised that the pullback in U.S. stocks in early August wouldn’t metastasize into a more painful, enduring selloff.
The analysts interpreted this as a sign that the August sell off in stocks was being driven by technical and seasonal factors, not something deeper and potentially more damaging. Investors demanding higher returns in the corporate-bond market would have signaled that their expectations for corporate cash flows and profits were beginning to meaningfully deteriorate.
The so-called forward price-to-earnings ratio shows how stocks, or stock-market indexes in aggregate, are being valued based on how much corporate profits are expected to grow over the coming year. Across Wall Street, it is seen as a standard for comparing stocks and indexes on an apples-to-apples basis, something that is not possible using only a stock’s price.
Since 1945, the S&P 500 index has delivered an average monthly return of negative 0.73% in September, the worst average performance of any month, said Sam Stovall, chief investment strategist at CFRA Research. The S&P 500 was officially launched in 1957, but many analysts use historical data to infer its performance before that date.