September Is the Cruelest Month - for Investors

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Trying to be a market timer is usually a losing proposition for investors, but some seasonal patterns are hard to ignore.

In the long history of the Standard & Poor's 500 index (^GPSC), September is the worst-performing month -- by far -- as big-time portfolio managers return from their summer vacations. The index has averaged a decline of more than 1 percent in all of the Septembers since 1928. That includes the worst monthly performance ever, a nearly 30 percent plunge in September of 1931. By the way, the market ended that month at 9.71; it started this month at a record high 2003.37.

Since 1928, the S&P has posted gains 39 times in September, lost ground on 46 occasions and once ended the month unchanged.

"If I was a shorter-term investor, I'd look at that trend," said Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, "but not if I'm in for the long term. It depends on what your time frame is."

The Worst Septembers

Just this century we've seen four of the market's worst monthly plunges come in September:
  • 2001, down 8.2 percent.
  • 2002, down 11.0 percent.
  • 2008, down 9.1 percent.
  • 2011, down 7.2 percent.
The loss in 2008 included the market meltdown on Sept. 29, when the Dow Jones industrial average (^DJI) plummeted 777 points and the S&P lost 106.

So should these numbers tell us anything about how we should adjust our investment portfolios right now? Probably not a lot, but analysts say that investors might want to be a little bit cautious right now, especially because the S&P 500 is at an all-time high after a five-year bull market run that may be getting tired. Many believe the market is due for a pullback, but that doesn't necessarily mean we'll get one any time soon. There's also growing worries that the mounting geopolitical concerns in Ukraine, Syria Iraq and elsewhere could rattle the markets here and abroad.

The Worst Days in October

If you want to look out over the next 60 days, October also causes lots of anxiety for market historians. While the S&P 500 averages a small gain (up 0.4 percent) historically, many of the market's biggest one-day crashes have come during that month, including three of the 10 biggest losses ever:
  • Oct. 26, 1987 -- down 20.5 percent.
  • Oct. 30, 1929 -- down 12.5 percent.
  • Oct. 6, 1931 -- down 12.4 percent.
You can see why October is not so affectionately known on Wall Street as the 'jinx month." However, October also has marked the end of bear markets on 11 occasions, most recently in 2002. Many investors think October is a good time to buy stocks, ahead of the big gains we often see in December and January, which are traditionally two of the best performance months of the year.

Silverblatt also notes that market volatility has been extremely low over the past few years, so "any volatility that hits today is going to be difficult for investors to swallow."

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