September's $30B Market Curse: Will ASX200 Fall Again?

The Australian sharemarket opened September the way it often does: badly. On Wednesday alone, the ASX200 dropped nearly one per cent, marking its lowest point in three weeks. By month's end, the index had steadied to flat, but the early stumble fit a pattern investors have come to dread. September, for two decades running, has been the worst month of the year for Australian equities.

The numbers tell a grim story. Over the past ten years, September has cost the market an average of $30.66 billion in value. In 2020, during the pandemic's worst shock, that figure reached $63 billion. Three years later, in 2023, it climbed to nearly $80 billion. The year before that—2022—the losses exceeded $175 billion. Josh Gilbert, eToro's lead analyst for Asia-Pacific, put it plainly: over the past twenty years, September has averaged losses of 0.47 per cent, making it the calendar's most punishing month for the ASX200.

Some of this damage traces back to sheer coincidence. September has a way of coinciding with market-shaking events. The month saw Lehman Brothers collapse in 2008, triggering the Global Financial Crisis into its most violent phase. It was September 2001 when the dot-com bubble was still ravaging tech stocks and the 9/11 attacks sent shockwaves through every market. In 1990, Iraq's invasion of Kuwait sent oil prices soaring and portfolios tumbling. More recently, Chinese property giant Evergrande missed critical debt payments in September 2021 before eventually collapsing, and a year later, unexpectedly hot US inflation rippled across global markets.

But bad timing alone does not explain the pattern. There are structural forces at work. By the time September arrives, most companies have already reported earnings and issued guidance. Fund managers have seen what they needed to see. Stocks that disappointed during results season get sold off as managers rebalance their holdings, while those that beat expectations may have already absorbed the good news into their price. Additionally, a substantial portion of the market goes ex-dividend around this time, meaning share prices are mechanically marked down by the dividend amount about to be paid to shareholders—a technical adjustment, not a sign of underlying weakness.

What happens next remains uncertain. No analyst can predict the market's next move with confidence. Yet observers are noticing uncomfortable echoes of past crises in today's landscape. Oil prices remain elevated due to Middle East tensions. Concerns about an artificial intelligence bubble are spreading. Bond yields have climbed to their highest levels since the Global Financial Crisis. Locally, the risk of another interest rate increase looms as inflation and GDP growth have surprised to the upside. Diana Mousina, AMP's deputy chief economist, flagged the lack of any long-term resolution to the Iran conflict, stretched stock valuations, sticky inflation, political uncertainty surrounding Trump and the midterm elections, and worries about whether AI represents genuine value or speculative excess.

Gilbert noted that the market is sitting near record highs after a reporting season in which forward guidance disappointed more than actual results did. There is little room for error. Seasonality is working against investors this September, and so are the fundamentals. The market has climbed to levels where a single bad surprise could trigger a sharp pullback.

Yet not all voices are bearish. Troy Sycamore at IG believes the ASX200's all-time high set in August could be tested and possibly broken in the coming weeks. Mousina offered a longer view: despite near-term volatility, investors should expect reasonable returns over the next twelve months, supported by continued economic growth, avoided recession, strong global profit expansion, and likely interest rate cuts next year. The question for September is whether the market can hold its nerve through a historically treacherous month, or whether this year will add another chapter to the season's notorious ledger.