- Historically the worst month of the year for US stocks has been September
- Will this September disappoint?
- Why has September been an underperforming month?
It’s September again so any number of articles will remind us that September has been the worst month for US stock markets, as shown in the following graph.
September has been the worst performing month because:
- It has the lowest average return. The average loss in September has been -0,7%, due in part to the fact that the worst month ever happened in a September. All of the other 11 months have positive average returns.
- The worst month ever was September 1931 when the S&P 500 lost 7%
- 48 of the past 96 Septembers – 50% — have suffered losses, contrasted to the other months that have had positive returns 63% of the time on average.
Momentum or reversal
This September will disappoint as usual if the current bear market momentum prevails, or it will surprise to the upside if the bear hibernates. Which do you think will be the case?
A possible explanation
In his book The Beast on Wall Street, Dr. Robert Haugen argues that investors muck up market behavior with their emotions, so the news of the day frequently results in market moves that don’t make sense. Markets go up on bad news and down on good news. But during the summer, many traders are on vacation so less mucking up. But then the mucking starts again when they return to their desks. Make sense?
Conclusion
The historical odds place this September at a disadvantage with a 50/50 chance of a loss. It couldn’t hurt to be defensive for these coming 30 days.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.