Why September Is Considered the “Ghost Month” for the Stock Market

4 mins read

Photo by Ishant Mishra on Unsplash

Stocks followed a winning streak in August, with experts saying that it has been one of the strongest months of the year. But investors are growing wary as September enters, historically dubbed as the worst month for stocks. Although the market went up slightly on Wednesday, the S&P 500 has fallen about 0.5% on average in September, according to Ryan Detrick, chief market strategist for LPL Financial. However, despite its track record, many are still hopeful that this September will be different as stocks have already risen significantly throughout the year.

September is arguably the worst month for investors to bet their money on the stock market. Since 1928, the month has generated an average stock market return of roughly -0.1% with a win-ratio of only 46%, comparatively lower than any other month of the year. Unfortunately, the last two decades have not given September a chance at redemption too.

While investors are more likely to be extra careful over the next four weeks, Funsdtrat released data showing strong equity returns in September made possible when markets experience a strong first half of the year. In the first six months of 2021, the S&P 500 increased more than 15% than it did in the past year, but the truth to Fundtsrat’s prediction is yet to be known.

Liz Ann Sonders, Chief Investment Strategist of Charles Schwab, said that anything could happen in September. The stock market is continually growing along with society, and Sonders stated that it’s “simplistic” to assume 2021’s September will follow history. “Are there a myriad of risks out there that at some point in time could be a risk factor that could lead to more than a 3% or 4% pullback? Absolutely. Could it be in September? Sure.”

Seasoned investors would agree that buying and selling stocks based on the month on the calendar is not necessarily one of the soundest decisions one can make when dealing with the stock market. Even some of the most seasoned investors who have been in the game for decades of their life would testify that stocks are still likely to get hit regardless of the month they are in. An important idea to note, though, is how investors should bounce back from the “tough months” to suffer as small of a loss as possible.

With the momentum provided by the first half of 2021, investors remain optimistic that this year’s September will reap a different result. The S&P has undergone over 15 winning streaks since 1945, all thanks to the rapid and fruitful performances of the first six months of the year.

Ryan Detrick, Chief Market Strategist of LPL, recently said, “We remain in the camp that stocks will continue to go higher, and investors should use any weakness as an opportunity to add to core equity holdings.

September, being a down month, could also have its upside. Experts at LPL are suggesting the people use the month to “dip and buy” stocks and expect to see returns because, according to LPL, “this bull market is alive and well.”

James Blunt

James Blunt is an Economics Journalist. He is well-equipped with research and investigation. For the past 8 years, he has been covering all economic and personal finance-related content that identifies with and topically relates to businesses' vision/target demographic.

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