• Major asset categories were sold off in September
  • Fears of recession are driving the markets right now
  • Best and worst performing ASX stocks for the month

Risk assets all over the world were crushed in September, with little sign the selloff might be over.

After being battered in the past week, the US S&P 500 index is now nearing a two-year low, hovering near the pandemic era lows of 2020.

The Dow Jones meanwhile has officially tipped into bear market last week, defined loosely as a 20% drop from the last high.

The Fed’s persistent rate hikes, which have now taken US rates to the highest level since the 2008 crisis, are recalibrating pretty much every asset price.

And there’s one common fear denominator that’s driving the markets right now – recession.

Two consecutive quarters of contraction is a long-held informal definition of a recession, but in the US, the obscure-sounding National Bureau of Economic Research (NBER) is the body that’s been officially delegated to make that announcement.

Despite the US economy shrinking from April to June for a second consecutive quarter, the NBER has so far refrained from making it.

Fund manager Russell Investments said it’s too early to predict that a recession is the most likely outcome for the US economy during 2023, but the probability is rising.

The fund says the main warning comes from the inverted yield curve, where the spread between the yields on the 10-year and 2-year Treasury bonds is currently the most negative in 40 years.

What type of recession could we see?

Andrew Pease, Russell’s Global Head of Investment Strategy, explains that how bad the recession is (if it does eventuate) will be in the hands of the Fed.

“We’re still in the softish landing camp for the US, and expect that strong household and corporate finances can limit the downturn to, at worst, a mild recession,” Pease said.

“The arguments against a deep US recession are that household and business balance sheets are in good shape, and moderating inflation could drive a recovery in real spending power.

“This outcome, however, relies on the Fed slowing the pace of tightening and pausing at only a moderately restrictive level.”

Either way, many analysts believe that we have now moved on from a correction phase of the market to a bear market phase.

A bear market is usually a deeper, longer decline in value than a correction and often results in a change of mindset and sentiment among investors.

In a correction, investors are still optimistic about future earnings and the economy, so many may go back into the market to pick up shares at the dip, pushing the market back higher.

“In a bear market meanwhile, there’s a change in the broader outlook on the economy and investor sentiment is more negative.

“Even after prices have fallen, they aren’t sure they want to take a chance and invest,” US based CFA Joseph Hogue told Forbes.

 

Here’s how the markets performed in September:

WORLD EQUITIES

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BONDS (10 YEAR GOVIE YIELDS)

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COMMODITIES

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Here’s how ASX sectors performed in September:

 

 

There were only small pockets of resistance as all 11 ASX sectors were hammered.

The battered Real Estate sector was the worst performer once again, down another 14% in September while taking its full year losses to over 30%.

Investors have by and large deserted the listed A-REIT sector as bond yields have continued to climb.

Some areas have been harder hit than others over the past five relentless trading days, with big-name funds player Charter Hall off by 10%, and industrial titan Goodman down by almost 20% in September.

Utilities stocks were also hard hit as major players Origin Energy (ASX:ORG) and APA Group (ASX:APA) took a beating in September.

Here are the top 50 performing ASX stocks for September:

Scroll or swipe to reveal table. Click headings to sort.

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MINING

Dundas Minerals (ASX:DUN) was the best performer after informing the market that massive sulphides and ultramafic rocks were found in two holes that were drilled to a maximum depth of 37m.

The discovery was found as the company explores for nickel, copper, cobalt, and gold in Western Australia’s potential Albany-Fraser Orogen.

Desert Metals (ASX:DM1) jumped after confirming a “significant” clay-hosted rare earth discovery at its Innouendy project in WA.

Results from the first assays of its 12,745m drilling program include: 8m at 2734 parts per million (ppm) total rare earth oxide (TREO) from 24m, including 3m at 4104 ppm TREO.

HEALTHCARE

Cronos (ASX:CAU) has surging after getting a Buy recommendation from Bell Porter.

The broker has initiated coverage on the company with a buy rating and a 60c price target, which has been surpassed last week as CAU closed at 69c on Friday.

FINANCIAL

BIR Financial (ASX:BIR) jumped after fellow ASX-listed HUB24 (ASX:HUB) increased its stake in BIR from 15.74% to 16.93%.

BIR’s core business is its 100% ownership of Pulse Markets.

 

Here are the 50 worst performing ASX stocks for September:

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