Worst Month for Stocks

We are entering, what is historically, the worst month for stocks. Should you react, or ride it out? That’s the subject of this week’s Fastest 4 Minutes in Finance.

Mid-Term Election Year Market Volatility Recap


A few weeks ago, we talked about the market volatility that usually arrives in mid to late August in a mid-term election year. So far, the major indexes have been mostly flat since then.

September Kickoff: Football Season and Cooler Temperatures


This week, as the calendar turns to September, there’s a lot to look forward to. The kickoff of football season, and hopefully the beginning of cooler temperatures. I don’t know about you, but September is one of my favorite months, as long as I don’t look at my investment portfolio.

S&P 500 September Returns Since 1950: LPL Research Chart


Since 1950, September is the only month with a negative average return. Take a look at this chart from LPL Research.

You can see the average monthly return of the S&P 500 for each month over the past 5 years, 10 years, 20 years, and since 1950. The blue box is highlighting September. It’s the only month that has been negative in all four time periods. It’s average return is -.6% since 1950 and even worse over the shorter 5 and 10 year terms. So, why is that? Why is September such a dud?

Seasonality Explained: Why September Underperforms


This is called seasonality. It just means looking at stock market performance from a seasonal perspective. Turns out, according to LPL, there’s a lot going besides football and cooler temperatures in September. Portfolio Strategist George Smith writes, “that a handful of recurring, calendar-driven behaviors tend to leave a footprint on returns: like, tax-related selling, mutual fund fiscal year-ends, corporate buyback windows, summer liquidity lulls, and the predictable rhythm of earnings season.”

S&P 500 Performance in Presidential, Mid-Term, and Non-Election Years


So, back to the mid-terms. Here’s a chart looking at the monthly performance of the S&P 500 in presidential election years, mid-terms, and non-election years.

While September is a little better in a presidential election year, there’s no significant difference between mid-terms and non-election years. This month is down, on average, -.8% in a mid-term election year, since 1950.

What Should You Do: Diversified Portfolio Strategy


So, what should you do? The short answer: Nothing. Assuming you are already invested in a diversified portfolio, and an investment strategy that fits your retirement timeline and risk tolerance, jumping off right now is not a good idea.

October and November Rebound in Mid-Term Election Years


First, take a look at the chart again. Look at October and November in a mid-term election year. October is up, on average, 3%, with November right behind at 2.7%. That’s a significant bounce. Chances are if you sell off out of fear, you will not get back in at the right time, and may miss the best months, or even days, of the year.

Not Every September Is the Same: Making a Plan and Sticking to It


And second, not every September is the same. They are called averages for a reason. Last year, the S&P 500 was up 3.5% in September. In 2023, it was down 4.9%. Guessing is not a good investment strategy. Making a plan and sticking to it, is.

Securities are offered through LPL Financial, Member FINRA/SIPC. GenWealth Financial Advisors is an other business name of Independent Advisor Alliance, LLC. All investment advice is offered through Independent Advisor Alliance, LLC, a registered investment adviser. Independent Advisor Alliance, LLC is a separate entity from LPL Financial.