By William Power
Whew. Stock-fund investors survived a brief summer swoon in early August, to once again log a positive month -- and increase the average double-digit gains for the year to date.
Few investors are serene, however, as September trading heats up. War, politics and the economy are enveloping investors and everyone else. And so much of the market's health still relies on a handful of large tech stocks, and anticipation that the Federal Reserve will be cutting interest rates.
The average U.S.-stock fund rose 1.4% in August, to push the year-to-date return to 14.2%, according to data from LSEG, formerly Refinitiv Lipper. (See Mutual-Fund Yardsticks.)
International-stock funds were up 3.1% in August, to push the year-to-date gain to 11.7%.
September hasn't started off well for stocks, with renewed concerns about a softening labor market. But then, September has always troubled some market strategists.
"Much as September is dreaded by many students as it's time for back-to-school, this month is also not well-liked by many equity investors with an eye for seasonal patterns," says George Smith, portfolio strategist for LPL Financial. Since 1950, he notes, the S&P 500 has sported an average return of negative 0.7% in September, the worst month for stock returns.
The past four Septembers brought investors these ugly finishes (in chronological order): down 3.9%, 4.8%, 9.3% and 4.9%, according to FactSet.
Bond funds also rose for the month. Funds focused on investment-grade debt, the most common type of fixed-income fund, were up 1.5% on average in August, to push the year-to-date return to 3.5%.
FINANCIAL FLASHBACK
A look back at Wall Street Journal headlines from this month in history
-- 10 YEARS AGO: The Alibaba IPO
Until 2014, American companies dominated the bulk of U.S. tech-company IPOs. Then came the initial public offering of China-based Alibaba, which went public on the New York Stock Exchange in September 2014, raising $21.8 billion -- making it the world's largest IPO at the time. (It was surpassed in 2019 by Saudi Arabian Oil, commonly known as Aramco.)
On Day 1 of the stock trading in the U.S., Alibaba's share price closed at $93.89, which was 38% higher than the opening price of $68. That is a far larger first-day bump than the average first-day rally of 26% for U.S. tech.
Why so successful? "The stock debut presented a huge opportunity to play China tech at an inaugural time," says Daniel Ives, senior equity analyst at Wedbush. "It was viewed as Amazon's little brother."
Alibaba's IPO also created a tech wave across China, Ives says. And certainly, Alibaba benefited, for a while. The stock peaked in October 2020 when it had gained over 250% excluding dividends, Yahoo data shows.
Since then, share prices slid from the record high of $319 down in 2020 to $78 recently. That epic stock slide coincided with CEO and founder Jack Ma's challenging Chinese regulators and then disappearing for months. "The regulations were positive for China's big tech, then it became negative," Ives says. And that meant global investors would be uncertain about Beijing's next move, he says.
-- 50 YEARS AGO: Bullion Boom? Nation's Gold Sellers Gear Up for 'Stampede' Among General Public
-- 100 YEARS AGO: Baking Stocks in New High Ground (Note to readers: Yes, baking, as in General Baking and United Bakeries. That isn't a typo for Banking)
--By Simon Constable
William Power is deputy section editor of Journal Reports in South Brunswick, N.J. Email him at william.power@wsj.com.
(END) Dow Jones Newswires
September 07, 2024 10:00 ET (14:00 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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