September: The Worst Month for Stocks

October. This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February.

-Mark Twain

September 1st is a very strange day for me. In Russia the school year across the whole country started on September 1st. I vividly remember myself as a child on that day throughout my childhood. The sun always shined brighter that day, the cleanliness of my uniform was at the year’s high. It was the custom to bring flowers to teachers on that day thus the school smelled like a botanic garden. Every year I promised myself that I’d be more serious, to smile less and make fewer jokes. Teachers did not like my smile or my jokes, always called me a class clown. Every year I failed at these goals. Thank God!

This introduction has absolutely nothing to do with what I am about to discuss except that September has just begun and it has historically been the worst month of the year for investors. After looking at the data from 1900 to 2008, it is safe to conclude that September historically was the worst month for investors, period. Stock averages and median returns were -1.16% and -0.56%, respectively. Far worse than any other months. In fact, with the exception of June where median returns were down 3 basis points, no other month of the year had negative median returns other than September. In 63 out of 108 years, September brought negative returns to investors, greater than any other month.

It gets worse: Returns in August were greater than 2% average and median returns in September were -2.29% and -1.44%, respectively. I’ll be honest and say I have no idea why this happened or what this September has in store for us. Maybe investors don’t like the end of summer and the first months of fall? Maybe if some of your stocks a hovering close to fair value you sell now? Or maybe if you were looking to buy a stock you wait a little?

Comments

[Tony Petroski:]

Vitaliy: I enjoyed your walk down memory lane.

Perhaps an explanation lies in August and not September. If August is so good, why? and if August is good, isn't it natual for some profits to be taken in September?

Sep 03 08:23 AM

[Jiang Nan:]

Tony, should we then ask If July is no good, why? and if July is no good, isn't it natual for some rebound in August?

Sep 03 08:50 AM

[Graham and ...:]

That seems to explain it as much as anything else.


On Sep 03 08:23 AM Tony Petroski wrote:

> Vitaliy: I enjoyed your walk down memory lane.
>
> Perhaps an explanation lies in August and not September. If August
> is so good, why? and if August is good, isn't it natual for some
> profits to be taken in September?

Sep 03 09:07 AM

[Mad Hedge F...:]

fdh. While the month of October has the reputation as the neighborhood slut, it is in fact September that does the real damage to your pocketbook. Yes, that September, the one that started yesterday. Since 1929, the average September has dropped by 1.3%, compared to an average rise of all months of 0.5%. Remember, Lehman went bust in that month last year, and with lead market Shanghai suffering a diabolical August, you have to wonder if history will repeat itself once again.

Sep 03 10:27 AM

[Old Trader:]

"Teachers did not like my smile or my jokes, always called me a class clown."

That's what ya get when ya leave a whoopee cushion on the teacher's chair on the first day, rather than bringing flowers.. ;-)

On a more serious note, I'm glad that "vacation" is over, and all of the players will be back at work, and we'll see how things play out. Frankly, I was a bit surprised at the size of the run up to today's close....although with such light volume, "managing" the market's not all that tough.

Sep 04 09:09 PM