The S&P/ASX 200 index dropped by 2.84 per cent in September, according to the latest data from S&P Dow Jones Indices, adding to the decline recorded a month earlier.
While Australia’s benchmark index posted a gain of almost 3 per cent during July, it was down 0.77 per cent for the quarter overall following the two months of consecutive losses.
S&P Dow Jones Indices noted that mid-caps and small-caps once again performed worse than their blue chip counterparts during September. The S&P/ASX MidCap 50 fell by 4.61 per cent, while the S&P/ASX Small Ordinaries moved down 4.04 per cent.
The S&P/ASX Emerging Companies also experienced a poor month, dropping by 4.94 per cent.
Among the other major indices, the S&P/ASX 20 ended the month down 1.91 per cent, the S&P/ASX 50 fell by 2.46 per cent, the S&P/ASX 100 moved down 2.75 per cent, and the S&P/ASX 300 declined by 2.89 per cent.
Energy was the only sector of the ASX 200 to end the month in the black with a 1.58 per cent gain. Real estate (-8.46 per cent), information technology (-7.92 per cent), and health care (-6.22 per cent) were among the month’s worst performers.
Consumer discretionary (-3.66 per cent), communication services (-3.46 per cent), industrials (-3.19 per cent), utilities (-1.88 per cent), materials (-1.84 per cent), consumer staples (-1.78 per cent), and financials (-1.57 per cent) all ended September in the red.
Despite the month’s negative performance, the ASX 200 remains up 3.71 per cent over the year to the end of September. Information technology (23.27 per cent), consumer discretionary (15.36 per cent), and energy (14.20 per cent) have all posted double-digit gains while health care (-8.24 per cent) is the only sector to be in the negative so far this year.
Meanwhile, the S&P 500 was reported by S&P Dow Jones Indices to have sunk by 4.51 per cent during September, but the major US index is still up 13.37 per cent year-to-date.
AMP chief economist Shane Oliver said that, while shares have become “oversold” and are due for a bounce in his opinion, the risk of a further correction before any near-term bounce is high.
“The ongoing rise in bond yields on the back of central bank warnings of higher rates for longer have pushed the risk premium that the key direction setting US share market offers over bonds to its lowest in over 20 years,” he said.
According to Dr Oliver, the risk of a recession, rising oil prices, uncertainty about the Chinese economy, a potential US government shutdown, and seasonal weakness are all weighing on the outlook for shares in the US and Australia.
He suggested that valuations in the US were looking “very stretched” and would become even more stretched if bond yields were to continue rising.
“While valuations for the Australian share market are more attractive, it would likely follow any further correction in US shares in the short term,” Dr Oliver continued.
“Our 12-month view on shares remains positive though as inflation is likely to continue to trend down taking pressure off central banks and any recession is likely to be mild.”
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.