I’m Not Worried About September
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Have you opened your investment account statements for September? If you’re having a good day, you may want to hold off a bit longer. Financial markets across the board were somewhere between bad and awful. Here’s a quick rundown of the major indexes from 9/1/23 through 9/30/23 as reported by Morningstar:
Historically, September is the worst month of all for financial markets. Financial market nerds like me know this, and it’s always fun to hear speculation as to why. Here’s a quote from Investopedia regarding what has become known as the September Effect: “It is generally believed that investors return from summer vacation in September ready to lock in gains as well as tax losses before the end of the year. There is also a belief that individual investors liquidate stocks going into September to offset schooling costs for children. Another theory suggests that since investors expect the September Effect to happen, market psychology takes hold and sentiment turns negative to align with those expectations.”
There’s a lot in this quote, but the most disturbing notion is that parents are investing in stocks through September and then pulling the money out because they need it to pay for school! A word to the wise, you should never invest money you need in the short-term in the stock market (especially when risk free US Treasuries are paying 5%!).
Assuming a bad month (or months) will lead to a down year, overall, could prove detrimental. Consider the chart below which displays the intra-year declines for the Russell 3000 (an index tracking most of the US Stock Market). For example, in 2003, there was an intra-year decline of 13%, but a positive annual return of 31%. If the 13% decline scared you out of the market, your US returns may have been well short of what the market would have given had you stayed the course.
Notice, also, that the market was positive in 17 out of the last 20 years. Despite the popularity surrounding the gambling craze that is day-trading, diversified, long-term investing in capital markets is an excellent way to build wealth.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The market and economic data are historical and are no guarantee of future results. All indices are unmanaged and may not be invested into directly. The information in this report has been prepared from data believed to be reliable, but no representation is being made as to its accuracy and completeness.
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Ben Dolan and Michael Foster are investment advisor representatives of Dolan Capital Advisors, Inc., a SEC-registered investment adviser. Investment advice offered through Dolan Capital Advisors, Inc.