September living up to its 'worst month of the year' reputation as ASX 200 finally cracks

ASX 200 down 6.7% in September as stock market frets about rising interest rates.

falling ASX share price represented by person trying to step over a crack

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

1) Overnight, the S&P 500 Index (SP: .INX) fell for the sixth session in a row, the longest losing streak since February 2020. It has fallen 7.8% so far in September, living up to its "worst month of the year" reputation. 

There's nothing more that markets hate than uncertainty, and with interest rates across the globe rising at some of the fastest rates in decades in order to tame inflation, we've got it in spades.

"Right now there's a lot of variables up in the air and we're not going back and forth between optimism and pessimism — there's a legitimate repricing and re-evaluation going on at the moment," said Shawn Cruz, head trading strategist at TD Ameritrade, on Bloomberg

2) Here in Australia, the S&P/ASX 200 Index (ASX: XJO) is finally showing signs of cracking, having lost 6.7% so far in September, bringing its year to date losses to a chunky 12.7%.

Big losers so far this year include popular tech stocks Megaport Ltd (ASX: MP1), Block Inc (ASX: SQ2) and Xero Limited (ASX: XRO), down 57%, 52% and 44% respectively.

Although the ASX 200 is having a tough year, it has got nothing on the falls seen in US markets, with the S&P 500 down 23.5% so far in 2022 and the NASDAQ-100 Index (NASDAQ: NDX) off 30.8% in the same period.

Huge gains in coal stocks – with Whitehaven Coal (ASX: WHC) and New Hope Corporation Limited (ASX: NHC) up 224% and 157% respectively this year – have saved the day for the ASX 200, with hot lithium stocks Core Lithium Ltd (ASX: CXO) and Sayona Mining Ltd (ASX: SYA) not far behind, up 102% and 77% respectively so far in 2022.

3) Speaking of coal stocks, writing on Livewire, Steve Johnson of Forager Funds says, using current spot prices, some coal companies "are generating almost their whole market cap every year in cash flow." 

Coal companies mentioned in this category include Yancoal Australia Ltd (ASX: YAL) and Coronado Global Resources Inc (ASX: CRN). 

The market is of course assuming coal prices won't stay this high forever, but in the meantime, investors can pocket some very juicy dividends. As ever, there are no free lunches in investing, and the old saying "if it looks too good to be true it usually is" rings true. Whilst the trailing dividends are very attractive, given the coal price is likely to fall over time, the risk of capital loss is elevated.

4) Whilst many investors are in a world of hurt in this tough year, ASX lithium stocks are partying like supply for the battery-making material will never catch up to demand as the transition to electric vehicles rolls inexorably onwards.

Broker JP Morgan recently said it expected a lithium supply shortfall to last until 2025, whilst Piedmont Lithium (ASX: PLL) CEO Keith Phillips effectively said he expects the shortfall to last until 2035.

That said, not everyone shares in the enthusiasm for lithium stocks. 

Writing in its August monthly update, the Spheria Australian Microcap Fund said it feels the risk-reward equation for Sayona Mining investors is unfavorable, given the company's near $3 billion (at the time) market capitalisation, considering first spodumene production is expected in 2023 and first refined product is planned by 2025.

The fund also noted fellow lithium stock Liontown Resources Limited (ASX: LTR) – with a market capitalisation (at the time) of close to $4 billion – has no revenue with first production expected in late FY24.

"We feel the lithium price is trading well ahead of fundamentals and there are risks with investing in this kind of project given the timeline to production and large valuation already ascribed by the market," said the fund.

The Liontown Resources share price has actually fallen 9% so far in 2022.

Motley Fool contributor Bruce Jackson has positions in Xero and Block. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended MEGAPORT FPO and Xero. The Motley Fool Australia has positions in and has recommended Xero. The Motley Fool Australia has recommended MEGAPORT FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
Share Market News

$10,000 invested in the ASX 200 5 years ago is now worth…

Guess how much $10,000 invested in the ASX 200 five years ago is worth today!

Read more »

Retired couple hugging and laughing.
Share Market News

Eyeing retirement: Do you really need $1 million?

AustralianSuper recently weighed in.

Read more »

Happy woman working on a laptop.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a pleasant end to the trading week for investors this Friday.

Read more »

Close-up of a business man's hand stacking gold coins into piles on a desktop.
Opinions

If I had a big cash pile like Warren Buffett, here's how I'd spend it in 2025

I'd put Buffett's billions to work straight away.

Read more »

Man pointing at a blue rising share price graph.
Technology Shares

Up 30% in a month, this ASX 200 tech share is 'a compelling opportunity': expert

Analysts from listed investment company WAM Capital say this ASX 200 tech stock is worth watching.

Read more »

Emotional euphoric young woman giving high five to male partner, celebrating family achievement, getting bank loan approval, or financial or investing success.
52-Week Highs

5 ASX 200 shares hitting multi-year highs after strongly rebounding from tariff turmoil

These stocks have hit new price milestones amid a day in the green for the ASX 200.

Read more »

A woman sits in a cafe wearing a polka dotted shirt and holding a latte in one hand while reading something on a laptop that is sitting on the table in front of her
Share Market News

3 key takeaways from the 2025 Macquarie Conference

More than one hundred companies presented at the Macquarie Conference this year. Here’s what we learned.

Read more »

An executive in a suit smooths his hair and laughs as he looks at his laptop feeling surprised and delighted.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »