September is statistically the worst month of the year for the stock market.
Going back to 1928, the S&P 500 has lost -1.12% on average in September. There seems to be plenty of news that could “cause” a decline in stocks this month. On top of the conflict in Syria, the Federal Reserve may taper its bond buying when it meets on the 17th and congress will soon be back to work and deal with the debt ceiling.
There are plenty of things to worry about if that’s what you like to do. I believe people often worry about things that never even happen, so they experience those things either way. I guess I am too focused on what is actually happening in this moment, now, to worry about things that haven’t even happened. And for portfolio management I always know what I’m going to do next, so I’m never trying to figure out what’s going to happen next and what to do next. I’ve been running my systems for a decade.
I noted earlier that Investor Sentiment is Bearish and that Fear is the Current Return Driver for stocks. That fear increased during August as stocks declined. It could be that investors have already anticipated the news? Keep in mind that “news” means “new information”, so none of these things are “news” today. We’ll see how it all unfolds. I believe it’s the uncertainty and change that makes life fun. I enjoy letting things evolve as they will. I know what I can control – and what I can’t.
I don’t worry about the news. I already know in advance at what point I’ll exit or hedge to control my risk or go short if markets decline.
The four charts below show a graphical image showing September as the worst month historically, though it only goes back 23 years from 1980 through 2012. It’s been the best month for gold, so maybe those holding losing gold positions will get some relief. We don’t make our investment decisions based on what month it is, but this does provide probabilities.