Market Beat: September’s effect on the stock market

Ken Roberts

Historically, September is the worst month for stocks. September is the only month of the year that the average return going back a long time is negative.

There have been some major events occur in September that had a profund impact on the stock market, like the 9/11 terror attacks and the collapse of Lehman Brothers Bank in 2008.

According to the Wall Street Journal, since 1926, large company stocks have increased an average of +0.9 percent in any given month of the year except September. In September, they have averaged a drop of -0.8 percent.

The University of Kansas did a study where they found that if someone began investing in 1802 and kept their money in the market only during the month of September, they would have lost about 50 percent of their initial investment over a 200-year period.

The same strategy in any other month of the year would have produced a return of about 75 percent. In the last ten years the market has declined more than 5 percent on four occasions in September.

Market researchers have spent years trying to discover why September is the worst month to no avail. It’s probably another one of those situations where correlation does not imply causation.

Any time you rank anything by month of the year, unless some of the values are the same, one of the months has to be the worst.

This September the market may be concerned about the potentially volatile situation in Syria, which could impact the price of oil and the global economy if it escalates.

Investors will also be focused on the actions of the Fed. The FOMC, Federal Reserve Open Market Committee, will have their next meeting on Sept. 18.

That meeting will be closely followed for signs that the Fed may begin to taper its bond-buying program known as quantitative easing or QE. Right now the Fed is buying about $85 billion a month in bonds.

A lot of that money finds its way into stock and commodity markets. Chairman Ben Bernanke’s term expires in January 2014. Any comments the Fed makes about tapering could impact the market.

So far this month, the market is up more than 2 percent and has been in an upward trend since the first of the month. It will be interesting to see what the remainder of the month brings us and if the September effect manifests itself this year.

Kenneth Roberts is a Truckee-based Registered Investment Advisor. Information on his money management service can be found at his blog at or by calling 775-657-8065. Past performance does not guarantee future results. Consult your financial adviser before purchasing any security.

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