September can be an ugly month for the stock market. Since 1928, it's been the worst month of the year, averaging a monthly return of -1.2%.1
Eddy Elfenbein points out that election years are particularly troublesome this time of year, losing an average of 2.72 percent between September 7th and October 12th.2
Bespoke research shows that if you zoom out further through the end of the year, the numbers are better post-September: "For all years since 1953, the median rest-of-year performance was a gain of 4.16% with gains 76% of the time."3 It does add a caveat, though, that when September starts ugly, as it did this year, results are mixed: "In the two years where the S&P 500 rebounded through year-end, the S&P 500 was up 5.74% (2001) and 6.39% (2015), but in the years when it continued lower, the losses were four times larger in magnitude with declines of 21.98% (1987) and 27.29% (2008). Gulp."3
Gulp, indeed.
There is some good news, though. On September 11th of last week, the markets had a massive reversal, beginning down greater than 1.5% and finishing up more than 1% by the end of the day. Ryan Detrick points to history that shows when the market has that kind of reversal in a day, the average moves higher over the next year have been up +12.2%.4
We don't predict what the market will do in any month. We pay attention to what happens over the long term, and more to the headlines of our clients' lives than the headlines of stock market news or news in general.
Ben Carlson, a Chartered Financial Analyst, had a great blog post recently that reminded me of the importance of long-term investing. He took returns over the last thirty years (1993-2023) and showed that even though one's ten-year returns could range from -1% to 17% and many negative events from COVID, currency, and housing crises plagued the country along the way, over that time frame "the stock market still returned 10% per year".5
How did an investor back in 1993 achieve that kind of investment performance? By staying invested during the best and worst months of the year.
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Sources:
- Chart taken from “September Is Once Again a Tough Month for Stocks”, The Wall Street Journal, September 9, 2024. Accessed online: https://www.wsj.com/finance/stocks/september-is-once-again-a-tough-month-for-stocks-8392fe0a?st=WZCyYf&reflink=desktopwebshare_permalink
- CWS Market Review - September 10, 2024.
- “September, What Now?” emailed on September 9, 2024.
- Quoted by Blake Millard from The Sandbox Daily Thursday, September 12, 2024.
- “31 Years of Stock Market Returns”, September 1, 2024. Accessed online: 31 Years of Stock Market Returns