Is September the Cruelest Month? Prieur du Plessis Sep 05, 2008 1:44 pm |
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Many reports have been published over the past few days about stock market seasonality and, specifically, about September typically being the worst month of the year.
In a recent post, I included the following paragraph: “Seasonality indicates that ‘September has firmly secured the rank as the worst month of the year’ (Stock Trader’s Almanac), but that a year-end rally typically starts in late September / early October.”
September has certainly got off to a rough start, with both the MSCI World Index and the MSCI Emerging Markets Index having declined every single trading day since September 1.
I realize numerous studies have been done on the historical pattern of monthly returns, but, in order to gain a first-hand feel for the data, I have researched monthly returns of the Dow Jones Industrial Index from January 1958 to August 2008. Some interesting statistics are summarized in the table below.

The following 2 tables show the percentage positive months (top graph) and the average monthly return (bottom graph) respectively.

It's clear from the above that September, on average, has historically been the worst month. But stock markets recovered after that and October, November, December and January have traditionally been good months.
Time will tell whether the current panic mode will make way for a better period in the weeks to come.
In a recent post, I included the following paragraph: “Seasonality indicates that ‘September has firmly secured the rank as the worst month of the year’ (Stock Trader’s Almanac), but that a year-end rally typically starts in late September / early October.”
September has certainly got off to a rough start, with both the MSCI World Index and the MSCI Emerging Markets Index having declined every single trading day since September 1.
I realize numerous studies have been done on the historical pattern of monthly returns, but, in order to gain a first-hand feel for the data, I have researched monthly returns of the Dow Jones Industrial Index from January 1958 to August 2008. Some interesting statistics are summarized in the table below.

The following 2 tables show the percentage positive months (top graph) and the average monthly return (bottom graph) respectively.

It's clear from the above that September, on average, has historically been the worst month. But stock markets recovered after that and October, November, December and January have traditionally been good months.
Time will tell whether the current panic mode will make way for a better period in the weeks to come.
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No positions in stocks mentioned.
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Prieur du Plessis is chief executive and principal shareholder of South African-based Plexus Asset Management, which he founded in 1995. The group conducts investment management, investment consulting, private equity and real estate activities in South Africa and other African countries. See also his blog, Investment Postcards from Cape Town.
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Copyright 2009 Minyanville Publishing and Multimedia, LLC. All Rights Reserved.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any article or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2009 Minyanville Publishing and Multimedia, LLC. All Rights Reserved.
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