September Slumps & The Seasonality of the Stock Market

September 06, 2021

September not only kicks off the Fall season but can be a month of falling prices for stocks. In fact, as the above chart reveals1, it’s infamous for being the worst performing month for the S&P 500 index.

Wall Street loves to come up with memorable slogans for certain months of the year. There is “Sell in May and Go Away” an adage that some seasonal investors used to sell the market in May and not return again till November or the “Santa Claus Rally” of December. Every month doesn’t get a catchphrase though. Instead, October has names for its dark days like 1929’s Black Tuesday and 1987’s Black Monday.

This begs the question, should we just invest according to the calendar? Likely not; at least not as the primary indicator for buying or selling. Like many things in life and among the stock market savvy there are debates on both sides. Timing the market itself can be a lose-lose endeavor. When it comes to average monthly returns it’s not like the spread between averages of up and down months is that alarming. Furthermore, averages are just that—averages—and don’t tell the whole story.

Understanding the history of the stock market should be a part of making investment decisions. Plus, seasonality could be considered in shorter term trading and as a factor in asset allocation rotation. For long term investors, however, there are many other facets that should drive any changes to your portfolio like a financial plan, risk tolerance, age, current needs, etc. No matter what the stock market brings this month keep your eyes glued to your financial goals more than the latest headline.