[Click eStock] 'Traditional Downturn' September Stock Market... Will This Year Be Different?

September Stock Market, Growing Seasonal Concerns
Bond Yield Rebound and Liquidity Contraction as Causes of September Market Correction
KOSPI May Surpass 2700 Level... Risk Management Needed

As September begins, concerns about seasonality in the stock market are growing. In particular, the KOSPI has shown a continuous decline in September over the past three years, and since 2000, global stock markets including the U.S. have exhibited similar patterns.

On the 2nd, Lee Kyung-min, a researcher at Daishin Securities, stated, "The U.S. S&P 500 index has an average September return of only -1.65%, with an upward probability of 45.8%, the lowest level of the year. Since 2021, the S&P 500's average September return has been -6.32%, with a 0% chance of rising. The KOSPI also has the second-lowest average September return of -0.92% since 2000, and since 2021, it has continued a three-year consecutive decline with -6.82%."

The weakness in September is also observed in bond yields and the VIX (volatility index). Since the financial crisis, rebounds in bond yields have stimulated liquidity and monetary policy uncertainties, causing stock market corrections. Since 2021, the U.S. 10-year Treasury yield has risen by an average of more than 30 basis points (0.30%) in September and October, and the VIX has shown a pattern of rebounding by more than 5 percentage points in September.

In particular, liquidity tends to contract in September around the timing of U.S. corporate tax payments and the Jewish New Year. In 2024, major events are scheduled including the FOMC (Federal Open Market Committee) on September 18, the BOJ (Bank of Japan) policy meeting on September 20, and the Liberal Democratic Party leadership election in Japan from September 20 to 29. Under these circumstances, pressure for yen appreciation may increase, leading to greater yen carry trade selling pressure, which could heighten concerns about stock market volatility.

Researcher Lee said, "Nevertheless, the KOSPI is expected to attempt a rebound after resolving short-term overheating and digesting selling pressure in the first week of September. Considering strong Korean export momentum, a rebound in the U.S. manufacturing index, and improvements in employment indicators, the KOSPI is likely to surpass the 2700 level. Attempts to break through the 2700 level before the Chuseok holiday should be used as an opportunity to strengthen risk management and increase cash holdings." He added, "In September this year, it is important to carefully analyze global economic indicators and liquidity conditions to manage risks."