September Stock Market Turbulence

September has historically been a turbulent time for the stock market. August has not shined either, as illustrated in Figure 1.

Figure 1 highlights the average monthly return of the S&P 500 Index since 1970 and 2010. 

We not only see a weak performance over a 50-year span, but if we isolate the August and September period from 2010 to the present, the results do not change very much. 

Simply put, August and September have not been kind to investors, at least on average. And that begs the question, “Why?”

Some have suggested that impatient investors cash out their losers by September. Others point the finger at mutual funds, which may jettison their underperformers.

Yet, a more concrete explanation has been elusive.

This year, August bucked the trend, with the S&P 500 Index adding 2.90% last month, according to MarketWatch data. The index closed just below a new high on Friday.

But September isn’t always a down month.

Since 1928, when the S&P 500 rose by over 13% for the first six months, the index’s median September increase was 1.4%, according to Barron’s and Fundstrat. Through June this year, the broad benchmark rallied 14%.

While looking at past trends makes for pleasant conversation, trading on such data can come at a cost. Those who sometimes correctly call short-term market movements often find themselves on the losing side in other instances.

Consider your long-term financial plan and avoid any temptation, if it arises, to buy or sell based on seasonal patterns.

If you have any questions or would like to discuss any other matters, please let me know.