{"id":41596,"date":"2013-09-03T05:51:16","date_gmt":"2013-09-03T09:51:16","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=41596"},"modified":"2013-09-03T05:51:16","modified_gmt":"2013-09-03T09:51:16","slug":"surprise-stocks-arent-guaranteed-to-tank-in-september","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/09\/03\/surprise-stocks-arent-guaranteed-to-tank-in-september\/","title":{"rendered":"Surprise! Stocks Aren\u2019t Guaranteed to Tank in September"},"content":{"rendered":"

By WallStreetDaily.com<\/u><\/a> <\/p>\n

It\u2019s officially September in the market – which is notorious for being the worst month for stocks. And, right on cue, every major media outlet is spreading fear.<\/p>\n

Everywhere we look, an ominous headline greets us\u2026<\/p>\n

\u201cSeptember is a stock market graveyard,\u201d declares The Globe and Mail<\/i>.<\/p>\n

Over at CNBC, we\u2019re told, \u201cLook out! September market headwinds are looming.\u201d<\/p>\n

The approach I fancy the most comes from The International Business Times<\/i>: \u201cWhy September is The Worst Month of The Year: Stocks Tank; Banks Fail.\u201d (Please note\u2026 just because it\u2019s September doesn\u2019t mean, say\u2026 Bank of America<\/strong> (BAC) is about to collapse!)<\/p>\n

I could go on and on with the examples. But you get the point. We should be scared stockless right now.<\/p>\n

Granted, uncertainties abound – any of which could reasonably sink the market. There\u2019s the worsening situation in Syria, the imminent start of the Fed Taper – and, of course, the never-ending debt ceiling and budget debates in our nation\u2019s capitol.<\/p>\n

But all the fears are overblown. In fact, we might actually be in store for a September surprise<\/i>. Let me explain\u2026<\/p>\n

An Undeniable Tendency<\/b><\/p>\n

I\u2019m not going to deny that September\u2019s terrible reputation is well deserved.<\/p>\n

As MarketWatch\u2019s <\/i>Mark Hulbert reminds us: \u201cSince the Dow was created in 1896, it has lost an average of 1.09% during September. The average return during all other months, in contrast, has been a gain of 0.75%.\u201d<\/p>\n

That’s a spread of almost 2%, which is huge, statistically speaking.<\/p>\n

Sadly, the track record for the S&P 500 Index in September isn\u2019t any better…<\/p>\n

As Guggenheim Partners\u2019 Scott Minerd wrote in a recent note to clients, \u201cSince 1929, the S&P Composite Index has averaged -1.1% for September, making it one of only three months with negative average returns over that time.\u201d<\/p>\n

But does that automatically mean stocks are doomed this<\/i> September, too, and we should bail on the market until October to be safe? Not a chance!<\/p>\n

Don\u2019t Be Misled<\/b><\/p>\n

As Hulbert notes, there\u2019s no \u201cplausible explanation\u201d for why stocks fare so poorly (and consistently) in September. And he\u2019s right. So it could be just a statistical fluke that should be ignored, not feared.<\/p>\n

I mean, changing levels of butter production in Bangladesh statistically explain the majority of the moves of the Dow, too. But you don\u2019t hear about anyone using that<\/i> data point to make investment decisions, do you?<\/p>\n

Of course not. Because correlation doesn\u2019t equal causation. And the same truth applies to any month on the calendar. It might correlate<\/i> to weak or strong returns. But there\u2019s no causation<\/i> involved.<\/p>\n

What\u2019s more, we need to remember that the stats above merely reflect the averages. Not every single September is a downer for stocks. In fact, stocks rose 3.57% in September 2009 and 2.42% in September 2012 (more about this in a moment).<\/p>\n

What about those uncertainties I mentioned before, though? Couldn\u2019t they spark a selloff?<\/p>\n

It\u2019s not likely. Known risks tend to be priced into the market already. They\u2019re not the real danger.<\/p>\n

So what is? I\u2019ll let the infamous words of former Secretary of Defense, Donald Rumsfeld, tell you:<\/p>\n

\u201cThere are known knowns; there are things we know that we know. There are known unknowns; that is to say, there are things that we now know we don’t know. But there are also unknown unknowns – there are things we do not know we don’t know.\u201d<\/p>\n

It\u2019s that last group of unknowns – things we don\u2019t know that we don\u2019t know – that sinks markets.<\/p>\n

They\u2019re also known as Black Swan events. And how in the world do you devise an investment strategy to protect against them? You can\u2019t.<\/p>\n

The only reliable and rational solution in any market environment is to use trailing stops and stay invested in the market. And that\u2019s especially true this year.<\/p>\n

No Reason for Paranoia, Here<\/b><\/p>\n

While everyone is fretting over the possibility of a September swoon based on over 100 years of data, the number crunchers over at Bespoke Investment Group uncovered an interesting anomaly.<\/p>\n

They discovered that during strongly positive years for the market – when the S&P 500 is already up 10% to 25% by September – average returns are actually positive<\/i>.<\/p>\n

Based on 25 occurrences, the S&P 500 averages a gain of 1.29% in September. And it delivers positive returns 68% of the time, according to Bespoke. (That compares to positive returns only 43% of the time during all<\/i> Septembers.)<\/p>\n

\"\"<\/p>\n

Keep in mind that we already witnessed two such occurrences during the current bull market, which I alluded to before…<\/p>\n

Heading into September 2009, the market was up 12.9%. Heading into September of last year, the market was up 11.9%. And in both instances, the stock market defied history and rallied during September.<\/p>\n

Bottom line: The market is up big again this year (16.5%). And that means the stage is set for a rally, not<\/i> a selloff. No matter how much the financial media tries to tell you otherwise.<\/p>\n

Ahead of the tape,<\/p>\n

Louis Basenese<\/p>\n

The post Surprise! Stocks Aren\u2019t Guaranteed to Tank in September<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

Article By WallStreetDaily.com<\/u><\/a><\/p>\n

Original Article: Surprise! Stocks Aren\u2019t Guaranteed to Tank in September<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com It\u2019s officially September in the market – which is notorious for being the worst month for stocks. And, right on cue, every major media outlet is spreading fear. Everywhere we look, an ominous headline greets us\u2026 \u201cSeptember is a stock market graveyard,\u201d declares The Globe and Mail. Over at CNBC, we\u2019re told, \u201cLook … <\/p>\n

Continue reading “Surprise! Stocks Aren\u2019t Guaranteed to Tank in September”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-41596","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/41596","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=41596"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/41596\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=41596"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=41596"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=41596"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}