September is living up to its reputation as the worst month for the stock market. However, analysts believe that the worst of the pain might have already passed.
So far, September has not been kind to the stock market. The S&P 500 has seen a 1.1% decline, and both the Dow Jones Industrial Average and the Nasdaq Composite have also experienced losses. It’s no surprise that September is historically known as the worst month for stocks. Since 1928, the S&P 500 has averaged a 1.1% decline during this month. The optimism of summer tends to fade away as investors look ahead to the following year, considering all potential pitfalls.
Despite this, analysts from Bespoke Investment Group suggest taking a step back and looking beyond September. They believe that the worst of the late-summer turbulence may already be behind us, even though it’s only been one week into the month.
According to their analysis, the three months following September 8th have historically shown impressive gains. In fact, they have been among the best three-month periods throughout the year. The S&P 500 has registered a median gain of 4.65% during this timeframe, which falls in the 87th percentile compared to all three-month periods in a year.
This analysis serves as a reminder of two important truths about the stock market. First, mean reversion is a powerful force. Short-term gains are often followed by short-term losses, and vice versa. Second, stocks tend to rise over time rather than fall. While declines can occur in tumultuous periods, the overall direction of the stock market has been upward throughout its history.
Therefore, don’t let a case of the “Septembers” bring you down! If history is any guide, brighter days are right ahead.
