While autumn officially begins in a few weeks, investors might have a different type of fall on their minds this month. That’s because stocks have a well-established history of losing ground in September. For example:
The S&P 500’s average September return over the past decade is -1.8%—the worst of any month (see the chart). The index has been down during four of the past five Septembers, with a -4.1% average return over that period.
S&P 500 Index Average Monthly Returns (Over the Past 10 Years)
There are factors that could help the S&P 500 buck the trend this time around. The economy has stayed strong (second-quarter gross domestic product growth was recently revised upward) and earnings have remained robust. What’s more, the widely-anticipated interest rate cut by the Fed later this month could help fuel continued stock market gains, if it happens. That said, potential danger signs include elevated valuations and high market concentration, with a relatively small handful of stocks driving the index’s gains of late.
Given both the current uncertainty and the historical patterns, it makes sense to consider ways to protect portfolios from some of the worst volatility and choppiness that could be coming our way—while also staying positioned to participate in potential further gains that may make September a month to remember for decidedly positive reasons.
By Mike Dickson, Ph.D.
Originally published at Horizon Investments
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