Seasonality and Election Year Considerations: A Dive into September’s Market
September has a well-documented history of being the worst-performing month of the year for the stock market, particularly when analyzing the Dow Jones Industrial Average (DJIA). This trend is consistent across multiple timeframes:
Negative Returns: September is the only month where the average return has been negative over the last 20, 50, and 100 years.
Source: Bespoke Investment Group: bespokepremium.com
Despite this historical weakness, we do not plan to make any significant portfolio changes based solely on September’s performance. Here’s why:
Short-Term Nature: The underperformance is typically limited to September, lasting just one month.
Strong Year-End Performance: Historically, the months of October, November, and December have been the strongest consecutive months, offsetting September’s dip.
Our typical approach during September involves minimal adjustments. The primary action we might take is to allocate new funds more gradually into equities during this month, especially for new investments entering our portfolio models.
How Does This Change in an Election Year?
Election years add another layer of complexity to September’s market dynamics:
Election Year Performance: Over the last five election years, the DJIA has posted negative returns in September four times (highlighted below in blue)
Slightly Better Average Returns: However, when considering the entire post-WWII period, September returns during election years are about 1% better than those in non-election years.
Average return during election years:
-0.58% (highlighted below in red)
Average return for all years:
-1.37% (highlighted below in green)
Source: Bespoke Investment Group: bespokepremium.com
Have questions or want to speak with our team directly? Contact us.
Robert Amato, CFP®, CIMA®
Principal
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Compass Wealth Management is a Registered Investment Advisor. Advisory services are only offered to clients or prospective clients where Compass Wealth Management and its representatives are properly licensed or exempt from licensure. This article is solely for informational purposes and is not intended to be relied on as a forecast, research, or investment advice, and is not a recommendation, offer, or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Compass Wealth Management to be reliable, are not necessarily all-inclusive, and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investments involve risks.