September

From Chart Of The Day:

"Except for a brief counter-trend rally in July, the stock market has struggled since peaking in late April. Investors are concerned. For some perspective, today's chart presents the Dow's average performance for each calendar month since 1950. As today's chart illustrates, it is not unusual for the stock market to underperform during the May to October time frame with a brief counter-trend rally occurring in July. It is worth noting that the worst calendar month for stock market performance (i.e. September) is fast approaching."

My Comment: There is a statistical period of weakness that typically runs somewhere between mid-August-through early to mid-October. There are all sorts of theories on why this occurs. These are my principle reasons for this.

The first is that the investment business essentially shuts down from about August 15-to Labor Day.  Volumes tend to be weaker during this time, allowing for negative trends to take hold. Many institutions such as mutual funds also have September 30 fiscal year ends. Typically they are adjusting their books for that date which also  may include tax loss selling.

A second reason is that late summer early fall means that we are much closer to the end of the year and corporations begin to fess up whether they are going to make their numbers.

Finally for whatever reason bad things just seem to happen this time of year. We've had hurricanes {Katrina} and wars {both World Wars started during this time, as did Iraq's invasion of Kuwait which led to the 1st Gulf War} and other calamities {9/11} seem to begin during this period.

Finally it should be noted that while this late summer/early autumn period is seasonally weak, it doesn't have to mean stocks have a precipitous decline. Last year for instance stocks posted over a 3% gain in September.

Link: Chart of the Day. September

*Long ETFs related to the S&P 500 in certain client accounts.