Wall Street debates whether another September stock swoon is really in the cards this year. (Julie Jacobson, AP)
September is the worst month of all for stocks. The worst since 1928. Since 1950? Dead last. But there may be hope for this September. Here’s why another September swoon may not be in the cards.
History spells out trouble for stock investors in September.
First the gruesome statistics:
* Since 1928, the benchmark Standard & Poor’s 500-stock index is ranked No. 12 in performance out of the 12 months of the year, with average losses of 1.02%, and finishing higher just 45% of the time, according to S&P Dow Jones Indices.
* The performance picture doesn’t look much prettier since 1950, either. September ranked last again, declining 0.5%, on average, and posting positive returns just 45% of the time. That dismal performance compares to a gain of 0.7% in all months, with positive returns 60% of the time.
* And the first day of trading this year adds to the gloomy tone. Around 2 p.m. ET, the S&P 500 was down more than 5 points, or 0.3%, and back below the key 2000 level at 1998.11.
Now the good news. Throw out all that ancient history — and today’s weakness.
If you slice the historical data a tad differently, the picture for September looks far more bullish.
First of all, the S&P 500 has finished higher four of the past five Septembers and has been up eight of the past 10 Septembers, according to S&P Dow Jones Indices. That tells you the long-term trend doesn’t necessarily have to drag down the current market, as there’s recent precedent for a bullish ninth month of the year.
But the folks over at Oppenheimer unearthed three other statistics that also put into question the notion that September has to be feared. Their research found that “the worst September performances tend to occur in established downtrends.”
But the current trend of the market is anything but down, as the S&P 500 has registered 32 record-high closes in 2014 and last week topped the 2000 milestone for the very first time.
Oppenheimer also found that September performance is positive when the S&P 500 is … :
1. Trading above its average price over the past 200 days, which it is now. (The 200-day moving average was 1878.82 at Friday’s close, according to Yahoo Finance, well below Friday’s record close of 2003.36 and today’s level.) The S&P 500 has posted average gains of 0.4% in September when it was above its 200-day moving average.
2. Trading in positive territory year-to-date heading into September, as it is now. (The S&P 500 entered September up 8.4% in 2014.) The index has posted average gains of 0.5% in September when it kicks off the month in the black.
3. Hitting fresh record highs in August, which it did. (The S&P 500 notched its 32nd record close of the year on Aug. 29.) It has risen 0.4%, on average, in September when it posted record highs the prior month.
The takeaway from Oppenheimer’s Ari Wald: “Don’t worry about September seasonals this year,” he wrote in a report. “We believe that worries regarding weak September seasonals are overstated this year because the S&P 500 is in an uptrend.”
So there you have it. Now you have to make your investment decision, based on either the long-term macro data related to September, or the more uptrend-specific data spelled out by Oppenheimer.
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