So far, September is living up to its reputation as the worst month for the stock market. But the worst of the pain might have already passed.
The ninth month of the year is historically the worst for stocks. According to Dow Jones Market Data, the S&P 500 has averaged a 1.1% decline in September since 1928. Typically, any summer optimism disappears in September as investors start looking ahead to the following year, with all its possible pitfalls.
But take a step back and look beyond September, say analysts from Bespoke Investment Group. The worst of the late-summer turbulence might already be behind us, just one week into the month.
“Performance in the three months following the close on 9/8 have been among the best relative to any rolling three-month period throughout the year,” the analysts wrote on Friday.
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For that three-month timeframe, the S&P 500 has registered a median gain of 4.65%, according to Bespoke. That’s in the 87th percentile relative to all three-month periods in a year.
Their analysis is a reminder of two generally accurate truisms about the market. First, mean reversion is a powerful force. Short-term gains tend to be followed by short-term losses, and vice versa.
Second, stocks are more likely to rise over time than fall. And declines tend to be concentrated in short, tumultuous periods. Over the course of the stock market’s history, the overarching direction had been up and to the right.
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Don’t let a case of the Septembers get you down. If history is any guide, brighter days are right ahead.
Write to Nicholas Jasinski at nicholas.jasinski@barrons.com