“Wake Me Up When September Ends”
I’m not sure that Green Day was referring to the S&P when they wrote that song but I’m going to borrow the sentiment.
The S&P is up about 14.59% in price so far this year (on Aug 21,2023). Market participants seem to be encouraged by the fading expectations of a pending, deep recession and by the fact that interest rates may have peaked. I am upbeat on the outlook for North American Stock Markets, and I believe they will trade higher by year end. But there is always a “However” to worry about.
The “However” in this case is the historical performance for stocks in September. From 1928 to 2021 the S&P was down on average 1% during the month of September. It was down 55% of the time. This “September Effect” is as much psychological as it is empirical. People tend to be a little anxious about what may happen in October and so sell in September to get in front of things. Oddly enough in spite of months like October 1929 and 1987 the month of October has historically been a positive one for the S&P.
I am not advocating selling stocks today to avoid the potential for a decline in the markets in the next month or so. I am, however, advising investors to hold some cash and not fully commit to stocks just yet. There may be better prices on our favourite companies in the next few weeks. The September effect coupled with the terrific returns on stocks for the year to date suggest to me that a pullback wouldn’t be surprising. Here’s to October opportunities!