So far, September has lived up to its reputation as the worst stock market month. But the worst of the pain may already be over.
The ninth month of the year is historically the worst for stocks. The S&P 500 has declined an average of 1.1% in September since 1928, according to Dow Jones Market Data. Typically, any summer optimism disappears in September as investors begin to look ahead to the year ahead and all its possible pitfalls.
But take a step back and look beyond September, say analysts at Bespoke Investment Group. The worst of the late summer turmoil could be behind us as soon as a week into the month.
“Performance in the three months following the Sept. 8 close was among the best compared to any rolling three-month period throughout the year,” analysts wrote Friday.
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According to Bespoke, the S&P 500 posted an average gain of 4.65% over the three-month period. That’s in the 87th percentile of all three-month periods in a year.
Her analysis evokes two common truisms about the market. First, mean reversion is a powerful force. Short-term gains are usually followed by short-term losses and vice versa.
Second, stocks are more likely to rise than fall over time. And declines tend to be concentrated in short, turbulent periods. Throughout the history of the stock market, the general direction has been up and to the right.
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Don’t let the September symptoms get you down. If history is anything to go by, better days are soon ahead.
Write to Nicholas Jasinski at [email protected]