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“September 18 begins the last 10 days of September, which is the worst 10-day period of the year for the SPX with the index up 40% of the time on an average return of -1.11%. When the first 10 days of the month are below average, the last 10 days of the month can be challenging as well with the SPX up 41% of the time on an average return of -1.66%,” they wrote in a client note.
The analysts also weighed in on the correlation between the S&P 500 and the U.S. unemployment rate. They note that the index can struggle in upward cycles for the unemployment rate.
“The SPX has managed to rally 50% of the time during bearish cycles for the US unemployment rate, so SPX returns during these cycles have been erratic. These cycles have lasted an average of 2.1 years with an average annualized SPX return of 2.4% (0.76% median), but the SPX did have double-digit positive annualized returns in four of the 10 prior bearish cycles in unemployment,” the analysts added.
BofA analysts also note that secular bull markets for the S&P 500 tend to remain resilient in the face of upswings in the U.S. unemployment rate, whereas secular bear markets are more affected by these changes.
During periods characterized by rising unemployment rates within secular bull markets, the average and median annualized SPX returns have been approximately 10%, indicating the market’s resilience during these phases.
