Welcome to September, historically the worst month for stocks

If you’re an investor who knows your market history, you might be tempted to tune out for a bit and start singing Green Day’s “Wake Me Up When September Ends.” The ninth month is traditionally the worst of the year for stocks.

The market was up slightly Wednesday morning, but the S&P 500 has fallen about 0.5%, on average, during the month of September, according to Ryan Detrick, chief market strategist for LPL Financial. Stocks have tended to go up, on average, during every other month — other than a slight dip in February — over the past half century. September 2020 lived up to the month’s bad reputation. The S&P 500 fell nearly 4% this month last year. Of course, that turned out to be just a brief blip in the explosive post-Covid lockdown rally.

This September has the potential to be a lousy month, too (just look at the headlines.) And stocks are already at record highs thanks to a seven-month winning streak for the S&P 500 Although corporate profits have surged this year, the S&P 500 is still trading at a price-to-earnings ratio that’s well above its five- and 10-year averages, according to John Butters, senior earnings analyst at FactSet. The Federal Reserve has a policy meeting later this month. Fed chair Jerome Powell reassured investors last week that the central bank won’t cut back on — or taper — its bond purchase program too soon. But investors will be watching every word from Powell for new clues about tapering. Covid-19 concerns haven’t gone away, either.

Although it’s true that state and local governments may try to avoid another round of stringent lockdowns, big companies including Google (GOOGL), Apple (AAPL) and Facebook (FB) have all delayed their return to the office plans until 2022. The start of a new school year also raises enormous risks, especially since kids under age 12 are not yet eligible to receive vaccines.

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