If you ask the average investor which month is the most volatile for the stock market, they’ll probably say October. It’s a reasonable answer, but it’s incorrect.
Despite October’s reputation for market-defining events—such as the crash of 1929 that led to the Great Depression, Black Monday’s drop in 1987 and the federal bank bailout at the start of the Great Recession in 2008—over the last 25 years, September returns of the Standard & Poor’s 500 stock index have been worse.1
This phenomenon has become known as the September Effect. And as you can see in the chart below, this isn’t just a U.S. market anomaly, but a global trend that has been affecting stock markets worldwide.
The September Effect Could Have Multiple Causes
Ask four market strategists what causes the September Effect, and you’ll likely get four different opinions. While statistics show September is more volatile, much of the theory about the September Effect is anecdotal.
Here are a few:
Election Season—September usually begins the U.S. election cycle, which can cause investors to reposition their portfolios if they anticipate a power shift in Washington, D.C. While the
Avoid the September Effect – Stick with Your Strategy
Market timing is a challenge because some of the most significant gains happen when you least expect them, while some of the worst days occur when everything seems to be going great. We would all love to miss the worst market days, but it’s difficult to avoid them and still capture the best ones.
So, don’t get wrapped up in thinking about things you can’t control, such as the September Effect. Your investment strategy reflects your goals, time horizon and risk tolerance, and our approach takes into consideration market fluctuations.
1The S&P 500 Composite Index is an unmanaged index that is considered representative of the overall U.S. stock market. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.
Your loan servicer should be able to help, but black and white documentation is always best.
- Account adjustment and consolidation
- The new SAVE repayment plan
For personalized help eliminating debt, investing smart and securing retirement, please contact Mark Ziety, CFP®, AIF® 608.442.3750.
Mark Ziety, CFP®, AIF®
WisMed Financial, Inc. part of the Wisconsin Medical Society.
Note: This article is for informational purposes only and should not be considered as financial or tax advice. Please consult with a qualified financial advisor or tax professional before making any financial decisions.
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