The September Effect- Coincidence or Real?

If you are an investor or follow the financial news then you are familiar with the September Effect, the curse of September on the stock market has investors worry every year. Historically September is the worst month for the stock market, remember 2008 market crash when Lehman Brother’s went down and market crashed? Yup, September 2008.

Bear market in 2002? Again September

Crash in 2000 and when 9/11 happened? September 2001

When Dow lost almost 30% in the 1930 Depression….you guessed right, again it was September.

This year…well we are only two days into September but so far we seem to follow the trend, S&P 500 and TSX both are slightly negative so far.

The list can go on and on about all the stock market crashes in the month of September, but is this just a coincidence or is there something about September that drags down the stock market like the Bermuda triangle drags down ships?

There are several theories about the September effect, my favorite theory is by York University finance professor Mark Kamstra. He relates the September effect to seasonal affective disorder (SAD) a psychological condition here is the study?

Brett Arends at Wall Street Journal  took a look at some of the theories on the September effect last month and the conclusion is that nobody really knows why this happens, maybe it is just a coincides.

What should you do? Well I’d say not much, just continue with your life and investment plan and follow the 10 successful investing tips. Some may take advantage of this September effect and go shopping on Wall and Bay street.

What’s your theory about the September effect? Do you believe it’s just a coincides?

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Comments

  1. says

    good historical info–I hadn’t noticed the long history of “September” events. I would note, that I think 9/11 happened in 2001. Your article shows 2000.

  2. says

    ooppss thanks Jessica…I fixed the typo!

  3. says

    I could see it being mental. Summer is over, school is starting, people are done with vacations….it’s kind of a mental let down for everyone. Congress is first getting back from their vacations and it’s almost a cool off period for the country, I can see the mental aspect having an affect almost like people get a case of the Monday’s at work.

  4. Elanor says

    I asked that same question in a post on TheStreet.com yesterday. Consequently Elizabeth Trotta discussed it with Doug Roberts, chief investment strategist for ChannelCapitalResearch.com, on her podcast yesterday: http://www.thestreet.com/story/10593515/1.html. It’s an interesting interview.

    I for one will be taking advantage of the September effect.

  5. says

    I think September sell offs are nothing but a trader driven event to increase volatility.

    The fact that everyone knows (or perceives) September is a “bad month”, it only makes it even easier to make money shorting the market. Traders don’t care where the market goes up or down since they make money either way depending on their long or short positions.

    Then you have the cumulative effect of traders act in unison. If they know the “word is out” (September is bad, market goes down — Spooky!), they will all position themselves to make money. When such a large group of traders are making near identical bets, then it will become a self fulfilling prophecy.

    Plus, you can’t forget that trading volume over the summer is lighter than normal, which means it’s easier for the active traders to move the market which ever direction they choose.

  6. says

    Ditto Matt’s points above. Don’t forget the article I wrote on it last month;) – also, congress has been out and apparently people fear (or some fear, or so the reasoning goes) that the big ol’ government will make changes that hurt the market, so better take your profits while the profits are still good. All the more confirmed this year, since we had such a strong rally since March.

  7. says

    From 2004 to 2007, Septembers have been a relatively good month. I think this year’ September will be flat.

    Historically, markets crash in October. Will there be a market crash in October? I think it will be possible if GDP numbers are a lot worse than expected.

  8. says

    Historically, markets crash in October. Will there be a market crash in October? I think it will be possible if GDP numbers are a lot worse than expected.

    I hope not, we have enough problems in this times. I hope this october will give no problems for the market.

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