Is September Considered A Bad Month For Investments?

The US stock market has had a tumultuous year in 2022 due to rapidly rising inflation and the Federal Reserve raising interest rates. You may have heard that September is the worst month for stocks or investments in the news or through financial publications. As per reports from many financial news and publishing agencies, September has been the worst month for stocks historically in the USA. Since 1928, the S&P index has decreased by a medium of 0.43% in September. The ‘Stock Trader’s Almanac’ has also reported that on average, September is the month when the stock market’s leading indices have performed the poorest. Many in the industry have dubbed this phenomenon the ‘September Effect’. Let’s try and understand why stocks have performed so poorly in September over the years.

Financial experts have multiple theories about why stocks have historically performed poorly over the years. Some experts believe that investors get back into stock trading in full swing during September, after a few dull months and reevaluate and re-balance their stock portfolio. Other experts say that most businesses also start slashing costs for budgeting purposes and reduce services, which may be a contributing factor to the decline in stocks in September. The ‘September Effect’ doesn’t just affect the US stock market, but also impacts the stock markets of many countries around the world. Some financial experts believe that this effect is a stock market anomaly, not linked to or caused by any specific events.

Some also believe that one of the major factors that lead to this phenomenon could be that a large majority of mutual funds sell their losing positions in order to end the year on a high and not report losing positions to the mutual fund shareholders. According to JP Morgan Wealth Management, the ‘September Effect’ could also be a psychological phenomenon, where investors are selling off their shares in September in anticipation of the stocks declining as per the trend. Another financial media outlet reports that stock prices usually stay low during the first half of September, but tend to go up during the second half of the month.

However, financial experts are still unsure if this phenomenon is applicable to the . As per a report, Indian stock market returns have been balanced over the past decade, with 5 years having positive returns and an equal number of years having negative returns. The Indian stock market doesn’t exactly follow the ‘September Effect’ which is seen in the US and other countries’ stock markets. Financial experts say that there are no specific events that negatively influence the Indian stock market in September. On the contrary, the festival season leads to higher purchases of stocks during this time period.

Financial experts believe the US stock market will continue to face uncertainty and volatility if the surging inflation continues and the Federal Reserve continues to increase interest rates. However, experts are unsure how much it will impact the Indian stock market in September. Experts advised that investors should not be worried too much about the September effect and advised them to focus on systematic investing while keeping the fundamentals in mind.