Overall sentiment will suffer if these bottlenecks don’t start to ease in the weeks to come. Car manufacturers, for example, have been particularly hit by the shortage of chips originating in Asia and are suffering weaker sales simply because they don’t have enough cars to sell, despite very strong demand from consumers. One risk is related to the Delta variant of Covid-19, which has exacerbated the stubborn supply bottlenecks preventing the economy from running faster. There are risks, of course, and they could hit sentiment before the end of October. This may qualify for the cleansing that some investors like to see. Some have noticed that even the seemingly invulnerable technology sector, despite the huge gains it enjoyed since the pandemic, fell well behind other sectors when the economy started to reopen last Fall.
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For instance, while it is true that the index has gone up for a long time without falling at least 20% (on a month-end basis), some sectors fell well in excess of 20% during that period, arguably flushing out some areas of excess. The bottom line is that whatever September and October did in the past is not very useful to determine what they will turn out to be this year.įocusing on the performance of the index as a whole also overlooks the relative behavior of sectors, which offers a better insight into what the market is really doing. Also, after the Financial Crisis, September was the worst month of any year only once – in 2009, the same year that October was the best month of that year and remained the best month of any year for the next 10. The market fell that month more than 9%, which was the worst return of any month since February 2009. But before you use this to adjust your investments, note that December had never been the worst month in any year, even going all the way back to 1928, until December 2018 came along. On one hand, September has been up less often than any other month and October had the worst result of any month. What does this all mean? Very little, in fact. Month that is most often the year’s best: April (19%).Month that is most often the year’s worse: August (16%).Month that is up most often – Tie: April and December (73%).Month that is up least often – September (45% of the time).In fairness, the worst month ever was September 1931, but this was before the S&P 500 index even existed, and during a very different economic and financial period of U.S. What is never mentioned is that it also had the best monthly return (in 1974, 16.3%) since the index was launched in 1957. There is some justification for this, as October has had some awful returns such as in 2008 (-17%) and in 1987 (-21.8%).
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Non-professional investors are better off with a month-end approach.Īs September rolls along, pundits insist on reminding everyone that September and October are bad months for the stock market.
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This is a good thing, because momentary, extreme moves can lead most people to close out positions at the worst possible moment. Although it fell more than 20% between mid-February and mid-March last year, the monthly statements that investors get did not reflect that volatility. Concerns that the market rally may be at risk are compounded by the fact that the S&P 500 has not had a 20% decline – the classical definition of a bear market – since the financial crisis, when measured at month ends.