For investors, September may be a challenging month due to the potential for a severe stock market meltdown. Here are three dangers to be aware of.
It seemed as though the stock market was about to implode throughout the majority of August. But all of a sudden, the month seemed to be concluding well.
The FTSE 100 increased by 1.72% this week, and people’s recent stock purchases appeared to be much more promising. On Wednesday, the index continued to rise, but what about the coming month?
The worst month for investors, according to history, is September. Wall Street has declined by 1.12% on average over the past month, according to data extending back to 1928. On why this is the case, there are differing opinions. Some attribute the selling surge that occurs when traders return from vacation, although no one is certain.
The good news is that most things turn out well, with the last few months of the year typically being more fruitful. In that situation, September is frequently an excellent month to purchase shares, taking advantage of any price drops.
Of course, all of this is a little stupid. Every investor is aware that the past is not a reliable indicator of the future. This year’s September may be fantastic. Or it might be garbage. Three things worry us, but we are about to find out.
Investors are still awaiting news on whether inflation will continue to decline, allowing the US Federal Reserve and Bank of England to cease raising interest rates (and eventually start reducing them).
Reduced borrowing prices will relieve pressure on households and businesses, reviving the economy. We all rely heavily on data. We might experience that crash if inflation proves to be considerably more resistant than we anticipated.
Alternatively, it might result in a disaster if central banks have overreacted and the economy is suddenly speeding toward recession.
It brings up a new concern for you. Nvidia, a chip manufacturer, and artificial intelligence (AI) in general. The world may be changed by AI, but there is a lot of hype surrounding it. So much so that Nvidia’s stock price decreased 6% after the company recently disclosed a doubling of profits.
Anything might happen
It will not take much bad news to terrify investors given the company’s price of 250 times profits. Given that US technology has been the primary source of entertainment this year, that could start a dangerous contagious cycle.
The use of the C-word raises the third significant issue. China. We are all aware that the $300 billion Evergrande Group bankruptcy is simply the tip of the debt iceberg and that the country’s $3 trillion shadow banking system is precarious. Beijing has only partially acted to block the path.
As a result, there are three significant hazards facing us as we enter September, with interest rates continuing to pose the greatest threat. Optimistically, we do not anticipate a complete crash. Investors are preparing for better times because of how robust the markets have been this year.
However, we are prepared and will act normally if share prices do fall. by looking around for discounted FTSE 100 shares.
2 cheap FTSE 100 stocks for September
Following recent price drops, these UK blue-chip equities trade on extremely low P/E ratios. Here are the reasons we are thinking about including them in our portfolio in September.
The value decline of Anglo American (LSE: AAL) in 2023 was expected. Growing concerns regarding the demand for commodities are a result of mounting fears over China’s economy.
The pressure many raw materials firms are experiencing is highlighted by the news this week from the diversified miner’s De Beers diamond subsidiary. According to the company’s seventh and most recent sales cycle of the year, only $370m worth of precious stones were sold. This was much less than the $638m from the 2022 sale.
The FTSE 100 miner, though, is about much more than just diamonds. Industrial and precious metals like copper, nickel, platinum, and iron ore account for more than 80% of its revenue. Additionally, a favorable long-term prognosis for these markets encourages us to think about purchasing firm shares in September.
Over the coming ten years, factors such as the switch to green energy, rising urbanization and infrastructure spending, and more digitalization will all significantly raise demand for metals. They might even produce significant market deficits across multiple segments.
The graph depicts how rising sales of electric vehicles (EVs) are expected to increase demand for battery metals. The prices Anglo American charges for its commodities may skyrocket in this environment.
Anglo-American shares trade at a forward P/E ratio of 9.4 times for £20.95 a share. This, in our opinion, does not accurately reflect the miner’s strong investment case.
A strong 4.4% dividend yield for 2023 gives investors an additional perk.
JD Sports Fashion
We are also thinking about purchasing some JD Sports Fashion (LSE: JD) shares at a discount. The retailer is currently trading at a forward P/E ratio of 10.8 times.
In 2023, the company’s worth decreased by around a fifth due to concerns about ongoing pressure on consumer spending. As a result, from its historical reading in the early to mid-20s, its P/E multiple has decreased to present levels.
This creates a tempting chance for dip buying, in our opinion. The demand for athleisure, or casual sportswear, is expected to continue growing quickly due to changing lifestyles. And as it pursues aggressive global expansion, this FTSE 100 company appears to be in an excellent situation to take advantage of this booming industry.
In recent years, JD has swiftly expanded its influence across Europe, North America, and Asia. As it expands in current markets and enters new ones over the next five years, it aims to open an additional 200–300 new stores per year.
It recently agreed to a partnership with Dubai-based GMG to open several outlets in developing nations like Saudi Arabia, Kuwait, Egypt, and the United Arab Emirates. Additionally, it is acquiring the final 49.98% of Iberian Sports Retail Group that it does not already own. JD will have access to an additional 460 stores throughout Europe as a result of the agreement, which is anticipated to be finalized in October.
Rapid growth exposes companies to a wide range of dangers. But JD is a great stock to buy right now due to its lengthy history of success and the significant advancements it is making in the e-commerce space.