Ugly September

31Aug10

This is a quick look at how the U.S. market has performed historically in September.

First the (somewhat misleading) numbers…

Based on these long-term averages September has been ugly, underperforming the average month across all metrics by a hefty margin.

But averages are misleading because they say nothing about how consistent an observation has been or whether it’s waxing or waning, so below I’ve assumed a trader was only long the S&P 500 index in September (red) versus the average month (grey) each year since 1930.

[logarithmically-scaled, growth of $10,000]

Note the uber-poor performance at the beginning of the sample (1930-1933). This might skew results (despite not being so applicable to today’s market), so in the graph below I’ve drilled down on September’s performance from 1934 onwards.

[logarithmically-scaled, growth of $10,000]

From 1934, September weakness has still held (though not to the same degree as the first graph would imply). Since 1934, 51.3% of Septembers have been positive, with an average monthly return of -0.26%.

In short, I’ve called the calendar month bias for September “bearish” on our September Seasonality Map.

Happy Trading,
ms

Geek note: all S&P 500 returns are dividend-adjusted so they will NOT match the S&P 500 price-only index. Dividends are interpolated from quarterly data.

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