Here we are. September has begun. Every year around this time, we hear the same familiar warning: “September is going to be a disaster for the markets.” Oh no! It seems September has acquired quite a reputation.
Since 1928, the S&P 500 has averaged a decline of about 1.1% in September and has finished the month higher only about 45% of the time. The Dow has a similar record, while the Nasdaq has averaged roughly a 1% decline since 1971. Statistics are fascinating but they have never influenced how I make investment decisions.
What interests me is where we are coming from. Investors are increasingly nervous about rising bond yields around the world. The Bond Vigilantes appear to be back in town, protesting large government deficits, rising debt and the growing cost of servicing it.
Then there is oil, which remains elevated and adds another headache to the inflation story. Naturally, the question is whether higher yields will eventually put pressure on equities. Another crash coming?
For me, the more important question is whether economic strength and corporate earnings can continue to outweigh these concerns. I believe they can. The bull market is not over!
So, if September brings meaningful market weakness, I intend to use it to add risk rather than run for cover. I would rather buy weakness caused by fear than sell simply because the calendar says September.
September may turn out to be difficult or perhaps it will give long-term investors with cash something more interesting than another statistic — an opportunity.