Stock-Selloff Fears for September Are Overblown
Just because the historical data exhibits some seasonal softness doesn’t mean it will continue into the future.
Seeing red.
Photographer: Michael M. Santiago/Getty Images North AmericaThe US stock market has given us plenty of real and perceived calendar anomalies to think about. There’s the observed tendency for stocks to experience a “Santa Claus rally” (during the last five trading days of the year and the first two of the next) and the weekend effect (where stocks have a habit of slumping on Mondays). Yet perhaps no period is as feared as September. Famously, it’s the month in which the South Sea Bubble burst in 1720, stocks collapsed as Britain left the gold standard in 1931 and the S&P 500 Index tanked in 2008 on news of the Lehman Brothers bankruptcy.
There’s no question that there’s something to the September anomaly. But beyond the most extreme anecdotes, the question is whether it should matter to the 99.9% of us not running quantitative hedge funds fine-tuned to exploit market quirks and inefficiencies. I’d say probably not.