The Arrival of Fall & Falling Markets

September 05, 2022

Fall is almost here.


Kids and grandkids are back to school. Camping equipment is headed to storage. The holidays will be here in no time. Ho-Ho-Ho.

Historically, like the weather, the stock market cools off too. As Barron’s notes: “The S&P 500 has averaged a 1% loss in September—dating back to 1928. according to Dow Jones market data. The same is true for the Dow Jones Industrial Average dating back to 1896. Those are the worst monthly performances for both indexes in the calendar year.”1

We have also been experiencing a bear market this year. Though we had a good bounce in the middle of the summer, at the time of this writing with the month of August down over 4%, that bounce has fizzled out. One researcher reminds us that the back third of a bear market can also be the worst part of it.2

What do we do with this?

Refuse to panic. The long-term investor knows that volatility is normal. Of course, markets go down sometimes. Duh. There is no higher return without higher volatility.

If equities do fall further, it can present buying opportunities for monies on the sidelines sitting in cash or fixed income. Usually, it’s best to plan for this in advance. Write down what you are going to do or put in a limit order. Buying is harder during a fall (pun intended).

Oddly enough, the same people who love a good Black Friday sale on their favorite products, are too afraid to invest in the stocks of companies that sell the very same product when the ticker tape is down. They run into the store for a sale but run out of the stock market when it’s on sale.

Cognitive dissonance runs deep.

Stocks could also end higher this month. One recent CNBC op-ed writer thinks, “much of the de-risking has already happened, thanks to the historic collapse during the first half of 2022.”3 The same researcher who showed the “scary” data in the paragraph above about bear markets revealed that when the S&P 500 retraces upward more than 50% like it did this summer after the June lows, the index has not gone back down to new lows since before World War 2.4 Chalk those up for some positives, but the fact is, as I repeatedly emphasize—no one knows.

No matter what the stock market does this fall, it’s an opportunity to revisit your risk tolerance. Risk management is central to having a portfolio that isn’t always giving you indigestion.

If you know someone looking for a risk manager, send them our free portfolio risk analysis and drop us a note telling us you did.

If you want a tummy ache, just load up on Venti Pumpkin Spice Lattes.

Happy Fall!