Fall is definitely here. The colors in the trees and shrubs are beautiful. Leaves are dropping and so are the temperatures. There is something energizing about fall to me. It also seems there is something about fall that energizes the financial markets, one way or the other.
In the 32 years that I have been in this profession, I’ve seen some pretty big stock market events occur in the fall starting with the Crash of ’87. But not all have been bad. It just seems like stock prices move more dramatically in the months of September through December.
Going back to 1950, here is some data about stock market performance as measured by the S&P 500 Index1.
Month Years up Years Down Average Return
September 30 37 -.64%
October 42 26 +.78%
November 45 23 +1.39%
December 51 17 +1.53%
I don’t know that one can draw any conclusions from this information, but I think it does disprove a common feeling among investors that the last four months of the year tend to be bad for stock prices. Another myth that it disproves is that December is a “sell” month as people adjust their portfolios for tax losses and such.
What this data really tells me is that it’s better to stay invested than to try and time the market. With the exception of September – October, November and December have had more than twice the number of “up” years as “down” years. Am I willing to stay the course with my investments knowing that history shows that staying invested will give me more up years than down years? Of course I am!
I haven’t really found any common stock market myths to be very accurate. Another popular one is “sell in May and go away.” Catchy, maybe even cute, but it leaves out a very important part of the investing equation. When do you buy? You can’t sell in May and go away without buying sometime.
Investing is not based on myths or magical formulas or even “gut feelings.” It’s based on research and facts. At least it is here at Legacy Wealth Management.
These are the opinions of Mike Berry and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice.
Mike Berry is a Registered Representative offering securities through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Legacy Wealth Management, LLC and Cambridge are not affiliated. Cambridge does not offer tax advice.
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