What if I told you that the stock market has a seasonal trick up its sleeve that could make September exceptionally rocky for your investments? It may sound like voodoo, but it's true.
Let's talk about how "seasonality", and September in particular, affects your investments.
The Seasonality Woes
You may have heard the phrase "Sell in May and go away". Indeed, June, July, August and September have historically been some of the weaker months as far as stock market performance goes. That's seasonality.
Fascinatingly, this seasonal weakness applies to both U.S. and international stocks.
September in particular has brought us some of the sharpest, and most unforgettable, market downturns.
"Black Monday" was a large market drop that made headlines in September of 1987.
And the height of the 2008 Financial Crisis could arguably be marked by the collapse of the investment bank Lehman Brother's, which occurred in September of that year.
But why September?
There is a lot of conjecture out there attempting to explain it, but above all else, it's my opinion that this has simply become a self-fulfilling prophecy. If investors are aware of this phenomenon, they are likely hyper vigilant of the possibility of it occurring once again. So when any little drop occurs, investors assume it's going to become worse, then they sell their investments in anticipation of exactly that, which further depresses prices, and we're off to the races.
How To Deal With It
So, what's an investor and retiree to do in the face of September's stormy seas?
First, take a breath. We've been here before.
"The test of a first-rate intelligence is the ability to hold two opposing ideas in
mind at the same time and still retain the ability to function."
F. Scott Fitzgerald
Here are your opposing ideas:
Idea Number 1 - Yes, September is frequently not a fun time to be an investor.
Idea Number 2 - Yes, you are generally well-rewarded for being an investor over time.
So, secondly, we must acknowledge that both of those statements are indeed true, and then we must be patient in order for Idea Number 2 to materialize, as it historically has.
I hope that helps you ride the September storm with a bit more confidence. If not, I'm here to talk about it with you, please just give me a call or schedule some time together below.
With gratitude,
C Garrett Moore, CFP®, ChFC®