Don't Panic Sell: September Stock Market Weakness Rooted in History

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Stock Market,September Weakness,Investor Psychology

While September has historically been a weak month for the stock market, experts advise against selling out. The seasonal trend likely stems from historical banking and farming practices, now ingrained in investor psychology.

The seasonal weakness was tied to banking and farming practices before the early 1900s. Nowadays, it's likely entrenched in investor psychology, experts said.September is the only month during that nearly century-long period in which investors experienced an average loss, according to Morningstar. They saw a profit in all other months.For example, February saw a positive 0.4% return, on average.

Plus, average large-cap U.S. stock returns were positive in September for half the years since 1926, according to Morningstar. Put another way: They were only negative half of the time. For example, the popular saying"sell in May and go away" would have investors sell out of stocks in May and buy back in November. The thinking: November to April is the best rolling six-month period for stocks.Fidelity Investments in April."More often than not, stocks tend to record gains throughout the year, on average. Thus, selling in May generally doesn't make a lot of sense.

 

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