Is the stock market due for a fall this fall?
Over the last 100 years September has been down about 60% of the time for the DOW and has had the worst monthly average out of any month during that period. Even when looking at the last 100, 50, and 20 years, September’s average monthly change has been lackluster – one of the worst.1
This market phenomenon has been coined the “September Effect”.
But is there something magical about this month that tends to make it underperform? Investopedia doesn’t think so:
Historically, September has been the worst-performing month for stocks spanning the last century, on average. It is also the most-frequently down month over the same period. Nevertheless, the effect has been attributed by most economists to chance (one month has to be the worst, after all). Depending on the time period under consideration, the September Effect may be present, or not.2
Let’s think about this another way – September is also up 40% of the time. Should a batter stop swinging just because he doesn’t get a hit 60%-70% of the time? Keeping at it is key.
Alright, enough baseball metaphors.
The truth is, we don’t know what this September will bring for the markets. As the saying goes, “It’s difficult to make predictions, especially with regards to the future.”
On a positive note, research from a year ago taken from Bespoke showed that when the S&P 500 is up year-to-date heading into September (as it is now), the month has historically been flat and has gained into year-end.3
We shall see.
In investing, long-term plans based on goals and risk tolerance matter more than the monthly cycles or the shifting of the solstice.
The stock market isn’t governed by a horoscope.
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Sources:
- Bespoke Investment Group via an email Thursday, August 31, 2023.
- September Effect: Definition, Stock Market History, Theories
- What history says about September and the stock market after summer bounce runs out of steam