September is traditionally the worst month on average for stock markets

Stock marketsWill there be a year-end rally?

For most people, the summer is a time for relaxing and taking a well-earned break after six months of working hard. But it can also bring instability and suprises in the stock markets. In the last eight years, August has been a negative month for investments, with an average drop of 4% in US equities, according to ATL Capital. As a result, August is considered by many market watchers to be a bad month.

But ATL Capital also flags that historic data shows “the summer is not always a particularly bad time for the financial markets.” To corroborate this opinion, the private bank refers to a study of the US stock market’s seasonality prepared by its asset management team:

“The report focuses on two different periods: the first running from 1910 (from the run up to and including the big depression of the 1920s) and the second from 1940 (with a composition of indices which are more in line with those of today) to the present day.”

While observing that there is greater volatility in the summer holiday seaons than in the rest of the year, the report confirms that in the summer, including June, July and August “the markets have recorded rises over 53% of the time, while the results have been negative just 47% of the time.”

Traditionally, September is the month with the worst performance, ATL Capital says.

“In the period running from 1910, in the month of September, the average decline was 0.73%, while in June, July and August, there was an average rise of 0.526%, 1.26% and 0.65% respectively.

And the results more or less coincide for the period running from 1940 to the present day, with September once again the most negative month on average in the summer, with a drop of 0.52%, ATL Capital notes.

One of the most frequent questions investors ask their financial advisors around this time of year is what to do with their investment portfolio ahead of the summer. ATL Capital’s asset managers’ view is:

“Although we recall other more turbulent summers…it’s not sufficient justification to make an investment decision exclusively based on a historic pattern of returns.”



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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.