The September Slump

As we go into the month of September, it may be helpful to look backwards to get an idea of where the market is headed. Historically, September has stood out for its poor market performance, with the S&P 500 losing about 1% on average since 1980.

Though the phenomenon is well documented, no one can point to a single cause. For one, the common phrase, “Sell in May, then go away” refers to fund managers taking the summer off–leaving their positions on autopilot and letting markets run their course. Once trading picks back up in fall, the jump in volume often creates a turbulent pattern for investors. September is also tax season for those who requested a six-month filing extension in the spring. This means that asset managers will be raising cash for their clients, which can put selling pressure on the market.

A simpler explanation for why September lags historically may be a positive feedback loop created by investors. Believing that the market will underperform in September, traders may sell their positions which creates another down month. This kind of short-term strategy requires sitting idle and ignoring the signs of opportunity.

There are ways that investors can participate in the market without worrying about the temporary noise. For one, technical analysis can measure growth potential even when the market is sluggish. By identifying levels of support and resistance, investors get a longer-term view of what their exposure is on the upside and downside. Additionally, utilizing structured notes as part of an investment strategy helps maintain broad market participation with built-in downside protection by design.

While this month may have a reputation for underperformance, it’s a statistical oddity that is not true for all stocks in the market. Regardless of time or season, having a robust investment strategy is invaluable and strategic tools such as technical analysis can provide investors strategic market participation that gives them the opportunity to capitalize when others bail out or sit on the sidelines.

This material is for informational purposes only and is not intended as investment, tax, or legal advice. Past performance is not indicative of future results.