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07-29-2021 - 'Tis the Seasonality...

Below are some historical facts about the upcoming 2 months (August and September); a very interesting period of time that may or may not repeat this year.


For the past 20 years (and these stats are virtually the same if you went back 80 or more years), the following has been observed:

  1. The single worst month for the S&P 500 has been September, where the S&P 500 lost and average of -0.4%.

  2. September is the 3rd worst month of the year for Energy, where this Sector lost an average of -0.4%.

  3. September is the next to the worst month of the year for Utilities, where this Sector lost an average of -0.2%.

  4. September is the 3rd worst month of the year for Financials, where this Sector lost an average of -0.5%.

  5. September is the worst month of the year for Healthcare, where this Sector lost an average of -0.2%.

  6. September is the 4th best month of the year for Industrials, where this Sector gained +0.3% on average.

  7. September is the 2nd worst month of the year for Consumer Discretionary where this Sector lost -0.1% on average.

  8. September is the 2nd worst month of the year for the Technology Sector, where it lost, on average, -0.2%.

  9. September is the worst month of the year for the Basic Materials Sector, where it lost, on average, -1.0%.

  10. September is the 3rd worst month of the year for the Consumer Staples Sector, where it averages a gain of +0.1%.

  11. September is the 3rd worst month of the year for the Communications Sector, where it gained an average of +0.2%.

  12. September is the 3rd worst month of the year for the Real Estate Sector, where it averages a gain of +0.3%.

Only 1 of the above 12 indicators is ranked as Bullish in September. Granted, July has historically been one of the best months for almost (not all) Sectors and certainly the best month for most of the major indexes, but August begins showing signs of weakness (historically), followed by the worst performing month of the year (on average), September.


So, what does this mean...


It simply means that as we move forward in time, we will not be surprised at a market that wants to pull back in September. Will the market absolutely pull back in September? No one knows, but the odds favor a pull-back.


Our investment bias will, most likely, become a bit less Bullish in September. We may want to hold a little more cash in September. We will likely keep our stops pretty tight in September.


But, we are data dependent and this September might be an anomaly where the market screams higher. As such, we will go along with the data at the time, but one should not ignore past patterns that have proven to be very prescient at times.

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