By Robert E. Quittner, Jr. CFP® & CMFC™
Investment Advisor Representative
[email protected]
Wall Street has a saying for nearly every month on the calendar. “Sell in May and go away,” “Buy in October,” and “As January goes, so goes the year.” More ominously, there’s also the “September Effect,” usually spoken in hushed tones because the market supposedly doesn’t do well in September. And if September needs any more bad press, the full saying for May is actually, “Sell in May and go away, come back on St. Leger’s Day”—St. Leger’s Day being a date in mid- to late September.
Do any of these phrases have any truth behind them? When it comes to September, the answer is yes.
The September Effect refers to September’s historically weak average performance across several major market indexes. In fact, since 1928, September has produced more down months than up months for the S&P 500.
With September now underway, should you be feeling any trepidation? Should you be nervously watching the markets? Here’s what I think.
Earlier this week, I came across a Wall Street Journal headline: “The Stock Market’s Breezy Summer Is Over. Investors Beware.” The headline sounds ominous—especially in September. However, the article itself is more measured than the headline. It doesn’t rely on fear or sensationalism; it simply suggests that investors should exercise caution over the next few weeks.
Why be cautious after two strong quarters? Not because an old Wall Street rhyme says so. The reasons are more concrete.
- The recent market run: Stocks have risen for the last two quarters, and conventional wisdom says markets cannot climb indefinitely.
- Geopolitical uncertainty: The ongoing conflict involving Iran could continue to affect energy prices, inflation expectations, and other parts of the market.
- The bond market: Treasury rates have been creeping higher amid concerns about oil prices, budget deficits, and competition from technology-company bonds.
- The Federal Reserve: Interest-rate uncertainty remains, especially with the Fed scheduled to meet next week on the 16th.
So then the question becomes, what does caution mean? Depending on your investments and risk tolerance, it could mean different things. For the vast majority of you reading this, caution means keeping a close eye on market moves—or having a trusted advisor keep a close eye on market moves for you. And for most of you reading this, we are doing that for you. Peter, Jeremy, Kyle, Austin, Nick, and I keep a sharp eye on everything that is happening in the markets and around the world.
If you don’t have someone watching out for your investments, or we’re doing that for you and you want to take another look at your risk exposure, give us a call. September may have a reputation, but reputations are not retirement plans. If you want to take another look at your portfolio’s risk exposure, give us a call.
Sometimes a little perspective is more useful than another market prediction.