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We're about to enter 'the worst month of the year for stocks'

Published 08/30/2016, 05:52 AM
Updated 08/30/2016, 07:26 AM
© Arnd Wiegmann/Reuters, The Boeoegg, a snowman made of wadding and filled with firecrackers, burns atop a bonfire in the Sechselaeuten square in Zurich, Switzerland, April 18, 2016.

Get ready, September could get ugly.

The month is the only one of the year in which the Dow Jones Industrial Average has been lower on average over the past 20, 50, and 100 years, according to Bespoke Investment Group.

"Market bulls never like when our September seasonality report comes around, because it has historically been the worst month of the year for stocks," said a note from Bespoke on Monday.

"As shown at right, over the last 100 years, the Dow has averaged a decline of 0.96% in September with positive returns just 42% of the time. No other month of the year has even averaged a decline over the last 100 years, and September has averaged a decline of nearly 1%."

Additionally, the market has been down an average of -0.88% over the last 50 years and -0.70% over the last 20.

Thankfully, there is some good news, when the index has been up for the year — as is the case this year — it usually means the month finished up but the returns are, as Bespoke put it, "still not great."

"As shown at right, over the last 100 years, the Dow has averaged a gain of 0.11% in September when the index has been up YTD through August," wrote Bespoke. "When the index has been down YTD through August, September has seen an average decline of 2.70%."

With the election nearing, complacency among investors, and a Federal Reserve meeting coming up, the market could break away from its sleepy summer.

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