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Key Points About the September Effect:
1. Historical Performance:
o The S&P 500 index has typically experienced declines in September, with an average monthly decline of about 1.2% since 19281.
o Despite this trend, the median return for September has turned positive in recent years1.
2. Theories Behind the Effect:
o Portfolio Adjustments: Some analysts believe that portfolio managers return from summer vacations and adjust their portfolios, which can lead to increased selling pressure1.
o Tax-Loss Selling: Investors might sell off losing stocks to offset gains for tax purposes1.
o Schooling Costs: Individual investors might liquidate stocks to cover schooling costs for children1.
o Market Psychology: The expectation of poor performance in September might lead to a self-fulfilling prophecy, where negative sentiment drives down stock prices1.
3. Recent Trends:
o In the past few years, the S&P 500 has continued to follow this trend, with losses ranging from 4% to 9% in September3.
o However, the market often rebounds in the following months, with significant gains observed in the last quarter of the year3.
Implications for Investors:
While the September Effect might cause some short-term volatility, it is generally seen as a temporary situation. Historically, the market has rebounded after September, suggesting that potential declines shouldn’t deter long-term investors31.
Are you considering any specific strategies to navigate the market this September?
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