Will September Send The Markets South?
August 31, 2009 by Tisa Silver
Filed under Finance
Will September send markets south again?
The January effect is probably the most popular calendar anomaly. When it holds true, the first three weeks of a new year provide abnormally high returns for those who invest in small-cap stocks.
Photo courtesy of flickr, courtesy of Andreanna
But September, has provided some pretty consistent results as well. Unfortunately, the results are negative!
The month of September has been unkind to the stock market more often than not. The trend is so noticeable that in several students in my Investments class have asked me, “Why isn’t there a September effect in the book?”
Good question.
September is typically the worst month of the year for the stock market, and analysts are well aware of it. According to CNBC, the S&P 500 has lost an average of 1.3 percent in September since 1928.
My students also asked why September is bad. Another good question.
Some analysts say summers have thin trading volume and September brings investors back to the market, just like students return to school. Others say it brings about anticipation of third quarter financials and by this time of year, optimism is fading.
This evening, I watched several guests on CNBC argue about what will happen in September. Each argued the bullish or bearish side emphatically, but none will know until October is here.
My take on September: Every September is different. I would use the same set of research tools in September that I used in January, because if you’re in it for the long haul, it doesn’t matter anyway.
I heard Doug Kass make the call on CNBC that a near-term market top has been put in and that a slow crawl down from these levels is coming. He is probably right. We’ve the relief bounce that financial Armageddon is not upon us. Now I think we need to see a substantial improvement in earnings, GDP, and the general financial situation before the markets head up again.