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Yesterday was only the first trading day of what’s traditionally Wall Street’s weakest month of the year, and September’s already living up to its reputation.
U.S. stocks tumbled Tuesday to their worst day since an early August sell-off, as a week full of updates on the economy got off to a discouragingly weak start. The S&P 500 sank 2.1% to give back a chunk of the gains from a three-week winning streak that had carried it to the cusp of its all-time high. The Dow Jones Industrial Average dropped 626 points, or 1.5%, from its own record set on Friday before Monday’s Labor Day holiday. The NASDAQ composite fell 3.3% as Nvidia and other Big Tech stocks led the way lower.
Understanding the September Effect
From 1928 through 2023, the S&P 500 index has averaged a decline during the month of September.
Stock Trader’s Almanac. “September Almanac: Worst Month of the Year since 1950.” This is, however, an average observed over many nearly a century, and September is certainly not the worst month of stock-market trading every year. In fact, for some years September has been among the best-performing months. Moreover, while the average return for September is negative, the median return for that month has turned positive.
CITE: https://www.r2library.com/Resource
While the September Effect might present a market anomaly in the sense that it violates the assumption of market efficiency, the effect is not overwhelming and, more importantly, is not predictive in any useful sense. This is because the time period under consideration will matter a great deal.
For instance, if an individual had bet against September over the last 100 years, that individual would have made an overall profit. If the investor had made that bet only since 2014, though, that investor would have lost money.
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Filed under: "Ask-an-Advisor", Glossary Terms, Monthly Reports | Tagged: DJIA, DOW, NASDAQ, S&P 500, September Effect | Leave a comment »
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