Is September the most Bearish Month? That Depends
What does history reveal about the stock market in September?
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Wall Street participants historically presume that September is the worst month for stocks. We decided to look at whether data bears that out, and if it does, whether it extends to banks, as well.
We looked back at the last 25 years and calculated the percentage of positive months for each month of the year for the S&P 500 Index (SPX). Indeed, September had the lowest percentage, showing gains 46% of the time. November had the highest, seeing gains 75% of the time.
Then he looked to see if the September Effect applies to bank stocks. Interestingly, the results were a bit different from the broader market,
For the S&P 500 Bank Index June was the worst month, logging gains only 32% of the time. The best month for bank stock performance was July, which recorded gains 76% of the time. September was the eighth best, or fifth worst, month of the year for that group of stocks.
For smaller bank stocks, as measured using the Nasdaq Bank Index (BKX) January and June tied for the worst-performing months and September notched the eighth-best performance. The best-performing month for that gauge was November.
Note that in the past year, the S&P 500 Bank Index climbed 42% and the Nasdaq Bank Index increased 40%, outpacing the S&P 500’s 24% rise.
Bottom Line
You can run but you can’t hide. Though the banking sector seems to run in the same direction as the broader market in Septembers past, you might consider moving some assets to the banking sector in order to suffer relatively smaller losses this September. At the same time, if you choose wisely and buy some of the accidentally higher yielders in this sector, you can pick up higher income that could offset any temporary capital losses for the month. That might be considered a win-win.
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