Shhhhhh! Can you hear that hissing noise? The sound you hear is the air rushing out of the stock market.
After all, it's September, the worst month for stock performance of all 12. According to the Stock Trader's Almanac, since 1950 there are three months that have averaged negative returns: February (yeah, thank goodness it's shorter than the rest), August, and the one to rule them all, September, with an average return over that 53-year span of -0.7%. Just as interesting, September has a bit of a streak going: five market declines in a row.
The best months for stock market gains historically are November at 1.7% and December at 1.6%.
I profess to being a little bit surprised that the biggest decliner wasn't October: After all, that's where the biggest, most noteworthy declines have taken place. Of course, the Great Depression sits outside of this particular sample, but there's still 1987 and 1998 to contend with. Yet October sits there right in the middle of the pack, with average gains of 0.8%.
If there is an explanation as to why September would be the worst month by a considerable margin, I don't know what it would be -- there isn't a preponderance of earnings reports in the month. Perhaps the trading community tends to return from their traditional August vacations to find the inevitable company that has deteriorated and must be sold. Perhaps this is the month where companies that had offered positive guidance for the year finally figure out that they're not going to achieve the goals they set for themselves.
And perhaps I should remind myself that these statistics, while they make for interesting talking points, are pretty worthless. I mean, could you imagine if Tom Gardner simply decided not to publish a Hidden Gems newsletter this month just because it's September? "Hey, folks, stocks go down in September. We have no chance. See you next month."
Pshaw.
First of all, correlation is not causality. The market hasn't gone down because it was September any more than it rises or falls with hemlines. Second of all, as we discussed Monday, the 6,000-plus stocks on the U.S. stock markets do not move in unison. What happens on a day-to-day basis with Home Depot (NYSE:HD) stock has little to do with whether Dollar General (NYSE:DG) goes up or down. Some companies are seasonal for the winter, such as Arctic Cat (NASDAQ:ACAT) or even Tiffany (NYSE:TIF), where others are dependent upon the summer, such as West Marine (NASDAQ:WMAR) or even a Lafarge (NYSE:LAF). Are we saying that September is simply a bad month for all of these companies? Maybe people are just selling in September so they can avoid October, sort of like joining the army to avoid the draft.
Stocks fluctuate. It may be meaningful on some level that they go down in September, but that doesn't mean they have to. It's a fun statistic, but it doesn't mean much.
But this November thing... there must be something to that. Bill Mann owns none of the companies mentioned in this article.
