September Weakness

31Aug11

The end of August is nigh. This is a quick look at how the U.S. market has performed historically in September.

First, the numbers…

From this 30,000 foot view, September has significantly underperformed the average month over the last 80 years.

But averages can be 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 in September (red) versus the average month (grey) each year since 1930.

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

The graph above shows that September’s underperformance has been consistent over the last 80 years. September was particularly abysmal in the early 1930′s, but has since continued to not just underperform the average month, but to lose money.

The following graph makes this more clear. Below is the rolling 10-year average of the excess monthly return in September versus the average month.

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

Same story. September was particularly abysmal in the 1930′s, and has consistently underperformed since.

Like all seasonality plays this one has by no means been a sure thing and doesn’t by itself justify a trade, but I’m calling the calendar month bias for September as UNDERPERFORMING and possibly BEARISH.

See the monthly seasonality map for daily seasonality predictions in September.

Happy Trading,
ms

Geek note: returns dividend-adjusted (dividends interpolated from quarterly data).

. . . . .

To stay up to date with what’s happening at the MarketSci Blog, we recommend subscribing to our RSS Feed or Email Feed.