September 2023’s Stock Market Challenges & Top Performers

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September has long been notorious in the financial world for its unpredictable and often tumultuous impact on stocks. This year, the month lived up to its reputation, presenting significant challenges for investors and shaking the confidence of many in the market.

The S&P 500, a market-capitalization-weighted index of 500 of the largest publicly traded companies in the U.S., experienced a 5% decline over the month. This drop is significant, especially considering the index’s broad representation of the U.S. stock market and its role as a key indicator of U.S. equities’ health.

Similarly, the Nasdaq Composite, known for its heavy tech concentration, didn’t fare any better. It was off by nearly 6% in September. For both these indexes, this month marked the most significant downturn in 2023, raising concerns about the potential for a more extended bearish phase or even a market correction.

Several factors contributed to this downward trend. Global economic uncertainties, inflationary pressures, and concerns over potential interest rate hikes by central banks have all played a role in investor sentiment. Additionally, geopolitical tensions and the ongoing effects of the COVID-19 pandemic, with its supply chain disruptions and labor market challenges, have added to the market’s volatility.

For investors, these declines have prompted a reevaluation of portfolios and investment strategies. Many are looking to diversify their holdings, seeking out more stable assets or considering alternative investment opportunities. ETFs, with their ability to offer diversification across various sectors, have become a focal point for many looking to navigate these turbulent times.

In the financial landscape of September 2023, commodities and cash have once again emerged as the frontrunners in the performance tables for major asset classes. This dominance is juxtaposed with a concerning trend: for the second consecutive month, global markets have witnessed widespread losses. These observations are based on a set of ETF proxies that provide insights into the performance of various asset classes.

The spotlight was on the iShares S&P GSCI Commodity-Indexed Trust (GSG), which not only led the returns for the month but also marked its fourth consecutive monthly advance with a rise of 3.7%. This impressive streak has bolstered GSG’s standing in the year-to-date performance metrics, positioning it in third place. As of now, only US stocks, represented by the Vanguard Total Stock Market ETF (VTI), and developed markets equities excluding the US, represented by the Vanguard FTSE Developed Markets ETF (VEA), have outperformed GSG in 2023.

Cash, often seen as a safe haven, especially in turbulent times, continued its strong performance in September. This can be attributed to the cumulative rise in interest rates observed in the recent past. The iShares Short Treasury Bond ETF (SHV), which serves as a cash proxy and comprises US Treasuries with maturities not exceeding one year, saw a modest increase of 0.4% in September. This brings its year-to-date performance to a commendable 3.5%, making it the fifth-best performer among major asset classes for 2023.

However, not all asset classes fared well. The Global Market Index (GMI), which experienced a decline for the second month in a row, recorded a significant drop of 4.2% in September. This decline is noteworthy as it represents the steepest monthly drop for the index in a year. Managed by, the GMI encompasses all major asset classes, barring cash, in market-value weights. It serves as a robust benchmark for multi-asset-class portfolios. Despite the recent setbacks, the GMI remains resilient with a year-to-date gain of 7.5%. This performance surpasses all its component markets, with the sole exception being the 12.4% year-to-date gain observed for US shares (VTI).

A retrospective analysis of GMI’s performance over the past year reveals a trajectory that mirrors the rise and the more recent decline in US stocks (VTI). In contrast, US bonds, represented by the Vanguard Total Bond Market ETF (BND), have remained relatively stable, showing no significant gains or losses over the past year.

In conclusion, while September 2023 brought challenges for several asset classes, commodities and cash stood out as strong performers. Investors and financial analysts will be keenly observing the market’s movements in the coming months to determine future investment strategies and assess potential risks and opportunities.



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