The Stock Market in September

September is often not a good month for the stock market. Since 1990 the average return of the FTSE All-Share Index in September has been -1.2%. For some time this record made September the worst month of the year for shares, but this year June has claimed the crown of worst month and September becomes just second-worst. Since year 2000, the Index performance in September has been even worse, with an average return of -1.6% in the month.

However, although the average return is bad in the month, over the longer-term about half of all Septembers actually have positive returns.

The problem is that when the market does fall in this month, the falls can be very large. For example, as can be seen in the accompanying chart, the FTSE All-Share Index has declined over 8% in three years since 2000. So, the big problem for investors in September is volatility – share price volatility is at its highest annual point in September.

Monthly returns of FTSE All Share Index - September (1984-2017)

Mid-cap stocks

The situation is even worse for mid-cap stocks. Since 2000, on average the FTSE 250 Index under-performs the FTSE 100 Index by 1.4 percentage points in September.

The average September

In an average month for September the market tends to gently drift lower for the first three weeks before rebounding slightly in the final week – although the final trading day (FTD) of the month has historically been one of the weakest FTDs of all months in the year.

In contrast to equities, gold tends to be strong in September: since 1968 the average gold price return in the month has been 1.8%, making September the second strongest month of the year for gold after February.

Sectors

On the sector front, September tends to be good for Tobacco, Nonlife Insurance, and Beverages, and relatively bad for Industrial Transportation, Real Estate Investment Trusts, Electronic & Electrical Equipment.

Companies

FTSE 350 shares that have been relatively strong in September over the last ten years are: JD Sports Fashion [JD.], SuperGroup [SGP], Genus [GNS], Jupiter Fund Management [JUP], and Dechra Pharmaceuticals [DPH]; while share that have been in the month are: Standard Chartered [STAN], BT Group [BT.A], Man Group [EMG], Rio Tinto [RIO], and William Hill [WMH].

Diary

In the diary this month are: the NYSE is closed on the 3rd (Labor Day), the FTSE quarterly index reviews will be announced on the 5th, and the US Nonfarm payroll report is on the 7th.


Article first appeared in Money Observer

Further articles on the market in September.

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