September is often referred to as ‘the cruelest month’ in terms of the stock market and so far 2023 shows little sign of bucking that trend.
According to a study by Bank of America using data back to 1928, September has typically produced the worst monthly return for the S&P500 by some distance at -1.2%.
Moreover, across that whole period the index has only finished the month in positive territory 44% of the time, so the odds of it ending higher this month are less than even.
Over the last 25 years the picture is slightly less grim, with September producing an average negative return of 0.53%, but a loss of 1.7% in the first week – after a gain of 17.4% from the start of January through the end of August – is well within historical bounds.
The week’s worst-performing sectors were health care and consumer cyclicals while the best performers were energy and basic materials, and there was a bias towards blue-chips and away from small-caps (see the Dow Jones performance relative to the Russell 2000).
Whether the narrative is US interest rates staying higher for longer or a struggling Chinese economy, with little by way of company earnings to spark enthusiasm over the coming week investors would seem to have little incentive to play the market.
WESTROCK
The second-largest American packaging firm has its sights set on boxing up London-listed Smurfit Kappa (SKG). A $20 billion merger is under discussion between WestRock (WRK:NYSE) and Smurfit and if successful, it would see the combined company have a main stock market listing in the US.
The packaging sector has been battling various headwinds of late, including a fall in prices which has led customers to run down stocks in the hope of being able to replenish them later on at much cheaper levels.
WestRock was created in 2015 from the merger of MeadWestvaco and RockTenn. It has since made several acquisitions including Star Pizza box, the largest US manufacturer and distributor of pizza boxes. Smurfit fought off a takeover attempt in 2018 by US rival International Paper.
Putting WestRock and Smurfit together should, in theory, create economies of scale. While WestRock’s shares jumped 7% on the news, Smurfit’s fell 1.5% which suggests that its shareholders aren’t ecstatic about the potential marriage.
CANOPY GROWTH
The legalisation of cannabis for recreational use in Canada in 2018 helped prompt a mad dash into cannabis-related stocks. Appropriately enough any initial euphoria around the nascent cannabis theme proved pretty shortlived with most relevant stocks giving back their early gains, including Canopy Growth (CGC:NASDAQ).
However, comments attributed to US president Joe Biden signalling he has always supported the legalisation of marijuana for medicinal purposes at a federal level has helped light up the sector once more, with Canopy shares up 50.9% over the past week. Canopy makes and distributes a range of cannabinoid products – both for medicinal purposes worldwide and in Canada for recreation.
A large number of US states have already legalised marijuana but broad-based reform could help make it easier for cannabis companies to access banking services and make cannabis easier to purchase, potentially boosting the revenue of operators like Canopy.
GAMESTOP
News this week of better-than-expected second quarter sales generated an initial share price gain for GameStop (GME:NYSE), but the stock drifted for a 0.7% decline to $18.3 over the week as investors focused on the harsh reality the video games retailer and meme stock favourite remains in the red.
Executive chairman and major shareholder Ryan Cohen has been shifting the bricks and mortar computer games purveyor towards a more online-focused model and revenues rose 2.5% to a forecast-beating $1.164 billion in the quarter ended 29 July thanks to stronger software sales.
In its first report since ousting chief executive Matthew Furlong, Texas-headquartered GameStop delivered a net loss of $2.8 million, narrowed significantly from the $108.7 million deficit a year earlier.
Embattled GameStop has said it will explore further ‘strategic options’, including additional store closures and the exit of unprofitable businesses.
