We call September storm season here at Avion. I’m going to tell you why.
The September Effect
For at least 100 years now, September’s been the worst month of the year for the market. Since 1928, it’s been down 52 times. In fact, its ratio of down years to up years is 60/40. 60% of the time you’ll lose money in September. There’s even a term for this. It’s called the “September Effect”.
So, this year we had a couple of hidden factors. Through August, we had this AI driving rally. Any stock with AI related to it really did well. There’s been a bit of a pullback, and towards the end of September, it really began to sink in that the era of free money is over. Globally, stocks pulled back a little bit as a result of that realization. That could be fairly permanent.
The good news though is that a September pullback very often leads to a fourth quarter rally. Now, one of my favorite analogies when we’re dealing with markets is that we’ve got to be careful because just like with the train, when you get off the tracks because you’re afraid of where things are going, it’s very easy to get hit by the train coming the other direction. And this is what happens when we try to game the September Effect. It doesn’t happen every single year. There’s a reasonable probability of a rally in the fourth quarter, but the bottom line is that markets are relatively efficient, and the more we believe something will happen, the more likely it probably won’t. In fact, that’s going to be the discussion for the next video coming up in a few days. With all this talk of a soft landing, what does that bode for the probability of such a soft landing actually happening?
We wish you the best of investment success.