Mitch's Mailbox

September 19th, 2023

Is September Always A Terrible Month For Stocks?

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Tim B. from Jacksonville, FL asks: Hi Mitch, I’ve noted in many articles and research that September is generally a terrible month for stocks. Looks like the first week of the month has been proving that right. Do you see this weakness continuing?

Mitch’s Response:

Thanks for your question, Tim. What you’re referring to is the “September Effect,” which says that September has been the worst-performing month for the U.S. going back almost 100 years.1

There’s a statistic that supports this view – from 1928 to 2022, the S&P 500 has averaged a decline during the September month, which sets it apart from the rest of the calendar year. Not every September is negative, of course, but it’s easy to see why the “September Effect” has gained popularity among investor circles and in the financial media.2

There are even a few theories for why September returns, on average, have been materially weaker than other months. Some say that traders are returning from summer vacation and want to take profits and harvest losses, to set up for the final quarter of the year. Institutional investors like mutual funds take similar actions. Others claim that investors are selling stocks to pay for return-to-school expenses. And yet another theory posits that because the “September Effect” is such a widely acknowledged anomaly, investor psychology makes its weakness a self-fulfilling prophecy.

Don’t buy into any of that.

Protect Your Investments from the ‘September Effect’

September can be a challenging month for some investors – sudden ups and downs in the market are hard to manage. But, even when your uncertainty levels are high, do you know that there are several positive aspects of volatility?

Today, all Mitch’s Mailbox readers have access to our exclusive guide, “Using Market Volatility to Your Advantage”. This guide focuses on some situations where volatility could have some potential hidden benefits in driving better investing decisions.

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For one, there have been plenty of years when September delivered nicely positive returns. It’s also true that while the average return for September is negative, the median return for the month is positive. That’s important.

But perhaps the biggest takeaway for readers here, I think, is that when you remove some of the big, historical market crashes for September, the month turns back to being positive on average. In fact, even just removing 2001 (September 11 attacks) and 2008 (Lehman Brothers failed on September 15, 2008) would do the trick.

It follows that I do not have a good answer to your question about whether I see weakness continuing in September. Looking out two or three weeks to forecast markets is just a guessing game, and I don’t make decisions based on such short timelines. What I will say, however, is that investors should not make decisions based on calendar quirks or other mantras like the “September Effect” or “Sell in May and Go Away. The stock market doesn’t adhere to a calendar.

In the meantime, discovering ways to protect your long-term investments from market changes could be a good solution.

I believe that there are positive aspects of market volatility that you don’t want to overlook. In our free guide, “Using Market Volatility to Your Advantage”4, all readers will receive our insight on:

• How market volatility can “shake up” complacent investors
• Potential bargains that may be uncovered through turbulence
• Why volatility may help prevent overheating and market “bubbles”
• And more…

If you have $500,000 or more to invest, download this free guide today by clicking on the link below.

Disclosure

1 Yahoo Finance. August 31, 2023. https://finance.yahoo.com/news/september-is-historically-an-awful-month-for-stocks--but-maybe-not-this-time-morning-brief-100007880.html

2 The Guardian. September 1, 2023. https://www.theguardian.com/business/2023/sep/01/september-five-cautionary-tales-economic-history-south-sea-bubble-trussonomics

3 ZIM may amend or rescind the free guide offer, Using Market Volatility to Your Advantage, for any reason and at ZIM’s discretion.

4 ZIM may amend or rescind the free guide offer, Using Market Volatility to Your Advantage, for any reason and at ZIM’s discretion.


DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.

Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions. Due to rapidly changing market conditions and the complexity of investment decisions, supplemental information and other sources may be required to make informed investment decisions based on your individual investment objectives and suitability specifications. All expressions of opinions are subject to change without notice. Clients should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed in this presentation.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties. Zacks Investment Management does not assume any responsibility for the accuracy or completeness of such information. Further, no third party has assumed responsibility for independently verifying the information contained herein and accordingly no such persons make any representations with respect to the accuracy, completeness or reasonableness of the information provided herein. Unless otherwise indicated, market analysis and conclusions are based upon opinions or assumptions that Zacks Investment Management considers to be reasonable. Any investment inherently involves a high degree of risk, beyond any specific risks discussed herein.

The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor’s. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. The volatility of the benchmark may be materially different from the individual performance obtained by a specific investor. An investor cannot invest directly in an index.
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