Why is September a bad month for the stock market?
The September Effect is a worldwide phenomenon; it doesn't only affect U.S. markets. Some analysts consider the negative market effect may be attributable to seasonal behavioral bias as investors make portfolio changes to cash in at summer's end.
Going back more than a century, the month of September has been — on average — the worst month for the stock market. And September 2023 appears to be no exception.
What happens in September in the stock market? It is said that stocks take a turn for the worse in September, an anomaly in the market. It is true that September has historically been one of the worst-performing and most often negative months, but the time period under consideration is very important.
The September effect highlights historically weak returns during the ninth month of the year, which could be aided by institutional investors wrapping up their third-quarter positions. In fact, looking at the chart above of monthly average returns, September averages the worst in the calendar year.
Since 1950, November is on average the strongest month of the year for stock market returns, and November through December is the strongest two-month period on average for returns, according to LPL Financial.
Over the 10 years, not much changed except that the market is pretty much strong from February through to the end of August. September is weaker, and then the end of the year tends to be strong.
What Has Been the Worst Month for Stocks? This will depend on the time period you look at, but over the past century, September has been the worst-performing month for stocks, losing around 1% on average.
Stocks continued to decline in September as the Dow Jones Industrial Average fell 3.4%, the S&P 500 slipped 4.8%, and the NASDAQ ended 5.8% lower. Around the world, Emerging Markets were down 2.6%, and EAFE sank 3.4%.
What is true about October is that it traditionally has been the most volatile month for stocks. According to research from LPL Financial, there are more 1% or larger swings in October in the S&P 500 than in any other month in history, dating back to 1950. September, not October, has more historical down markets.
The October Stock market is a recognized market anomaly, which gathers that stock values tend to decline during this month in the financial calendar. Although as per many statisticians, the idea of the October stock market is considered more of a presumed expectation rather than an actual phenomenon.
What is the strongest month for the stock market?
The S&P 500 usually moves higher between June and August, and July has historically been the single best month of the year for the index.
This rule suggests that significant trend reversals often occur before 11 am Eastern Standard Time (EST) during the regular trading session. In this comprehensive guide, we will demystify the 11am rule and explore its implications for traders.
Some traders follow something called the "10 a.m. rule." The stock market opens for trading at 9:30 a.m., and the time between 9:30 a.m. and 10 a.m. often has significant trading volume. Traders that follow the 10 a.m. rule think a stock's price trajectory is relatively set for the day by the end of that half-hour.
Granted, the average returns for the S&P 500 during June and September have been lower than those in January. Still, it's indisputable that January has been one of the worst months for the S&P 500 over the last 20 years. Should investors stay on the sidelines?
We have all heard the old Wall Street adage, “Sell in May and go away.” The six-month period from May through October historically has been the worst time of year to own stocks, while the six months between November and April historically have been the best [Figure 1]. Friday, November 1, marked the start of this ...
Perspective on the Stock Market's Return in November 2023 and a Look at the Probable December 2023 Return. November's 9% return on the S&P500 was strong, but past Novembers have seen even higher returns. Historical data suggests that December is likely to deliver a positive return, with a 77.3% chance of success.
Lower trading volumes: Trading tends to decline in August as traders and investors go on vacation before the summer ends. This can lead to more volatile swings in prices.
That's Not Bad. As August begins, investors get ready for a lighter month of trading, but that doesn't mean it will be a bad month for markets. In fact, according to Dow Jones Market Data, the Dow Jones Industrial Average gained an average of 1.1% in August, going back to 1896.
August can be a bad month due to lower liquidity levels. Many Europeans and Americans are on holiday then. Lower liquidity levels means the markets can be pushed around easier.
But There's A Trick To That Treat. In September, the S&P 500 fell 4.9% and the Nasdaq lost 5.8%, their worst monthly performances of 2023. Even better, October has the most follow-through days, confirming a new stock market rally.
Is December a good month for stocks?
Well, historically, December is one of the better months of the year. As the chart below, from Yardeni Research shows, it ranks third among all months with an average return since 1928 of +1.3%.
The first trading day is the best (from the close of the last trading day to the close of the first trading day). The worst trading days of the month to trade stocks are trading days number 13, 14, and 22.
The September Effect is a statistical anomaly referring to historically weak stock market returns during the month. Potential causes for the effect include seasonal rebalancing, tax-loss harvesting by mutual funds and simple market psychology.
Basic Info. S&P 500 12 Month Total Return is at 30.45%, compared to 20.82% last month and -7.69% last year. This is higher than the long term average of 8.65%.
The Dow Jones Industrial Average fell 158.84 points, or 0.5%, to 33,507.50.
