When it comes to stocks in September, history has a simple message\u2014sell. Since the inception of the Dow Jones Industrial Average (DJIA) in the late 1890\u2019s, the month that brings us the season of fall has also brought us a pattern of fall, as September has delivered an average loss of -1.1%. Compare this to the other eleven months of the year over that same time frame, and you see an average gain of +0.8%. What\u2019s the deal, September?<\/p>\n
The statistics can also be looked at in different ways to suggest the same conclusion. One study looked at performance over decade-long periods since the late 1800\u2019s and found that in more than half of those decades September ranked in either 11th<\/sup> or 12th<\/sup> place in terms of monthly average performance (according to HubertRatings.com). For those keeping score out there, there are 12 months in a year, so coming in 11th<\/sup> or 12th<\/sup> place is not good.<\/p>\n September performance gets even worse\u2014and the probability of negative performance even higher\u2014when August is a weak month for stocks. Sam Stovall, the U.S. equity strategist at S&P Capital IQ, studied the correlation between August and September regarding S&P 500 performance. His research revealed that if the S&P 500 fell more than -5% in August, then stocks would fall or be flat in September over 80% of the time<\/em>. He also found that the average market drop during September months following a down August is -4%.<\/p>\n Ok one more historical fact: if you look at the S&P 500 going back to 1945, September is lackluster a majority of the time\u2014stocks have fallen 55% of the time, which is notably more than other months.<\/p>\n So again we ask, what\u2019s the deal September? <\/em>The answer: nothing. Look at my last stat one more time: September is negative 55% of the time going back to 1945. If we look at the glass half full, this also means it is positive 45% of the time<\/em>. And, since we know that every other month has a higher probability of being positive than September (at least since 1945), to me it\u2019s a weak argument to sell in September just to get back in the market in October. The transaction costs likely aren\u2019t worth it, and there\u2019s nearly a 50% chance you\u2019ll be wrong.<\/p>\n Beware of Market Myths and Focus on Time Tested Probabilities<\/strong><\/p>\n Selling in September is just like the \u201cJanuary Effect\u201d and \u201cSell in May and Go Away\u201d\u2014they\u2019re all not powerful enough (statistically) to influence investment decisions in a meaningful way. They\u2019re too short-term in nature and don\u2019t give investors the right kind of insight to be successful over the long-term, which is what\u2019s important. Here are the only two market mantras that investors should focus on instead:<\/p>\n Bottom Line for Investors<\/strong><\/p>\n An investor may be tempted to sell after seeing the September statistics at the beginning of this post. The concern that a stock market downturn is around the corner might be further influenced by September\u2019s shoddy performance last year (-2.15%), and the year before that (-1.55%). But go back a few more years to 2012 and 2013, and September fared much better (+2.42% and +2.97%, respectively). The point is, there is no way to know whether it will be up or down, and for long-term investors, it doesn\u2019t make sense to try and market time.<\/p>\n What does make sense, in my view, is to adequately diversify your portfolio, so you do not have to worry as much about the actual outcome this September. Zacks has several strategies that invest in different asset classes and styles \u2013 like small-cap, large-cap, mid-cap, dividends, and bonds \u2013 that can be used to build a portfolio of non-correlated assets. When I said earlier that diversification is key to managing risk, I meant it.<\/p>\n <\/p>\n \n","protected":false},"excerpt":{"rendered":" When it comes to stocks in September, history has a simple message\u2014sell. Since the inception of the Dow Jones Industrial […]<\/p>\n","protected":false},"author":1,"featured_media":4122,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[55,59,60,63,71],"tags":[],"class_list":["post-3465","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economic-outlook","category-financial-professionals","category-institutional-investors","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3465","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=3465"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3465\/revisions"}],"predecessor-version":[{"id":11206,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/3465\/revisions\/11206"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=3465"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=3465"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=3465"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n
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