Stock Market Investing: Will September Be Better Than August?

| September 1, 2011 | 0 Comments

I’m sure more than a few investors are breathing a sigh of relief right about now…


August finally came to a close yesterday.  And anybody who’s been watching the markets will tell you… last month was a doozy.

Bad economic news mixed with extreme volatility made for one of the worst market performances in 10 years.  At one point, the Dow had plunged a staggering 13.8% from its August 1st opening of 12,303.

As a matter of fact, it only took seven trading days for the Dow to drop from its August 1st high to the intraday low of 10,603 on August 9th.

But that’s not even the half of it…

From the July 21st high of 12,751, the Dow dropped nearly 17% by August 9th.  I don’t know about you, but in my book that’s a bonafide market crash.

But the large dose of panic selling pushed stocks to extremely oversold levels.  And it wasn’t long before brave investors were picking up undervalued stocks.

And now, all that bargain buying has pushed the Dow back up to the 11,600 area- where we sit now.

So what happens next?

Will September hold a little more promise for investors than last month’s market meltdown?

Don’t get your hopes up… at least not yet.

Looking back at seasonal market returns, you’ll find September is a notoriously weak month.  According to Bespoke Investment Group, over the past 100 years the Dow declined an average of 0.83% in September.

What’s more, in only 42% of Septembers over the last 100 years has the Dow closed higher than where it started the month.  That’s worse than any other month of the year!

So does that mean you should turn your portfolio out to pasture and take the next month off?

It may be tempting, but I wouldn’t do that if I were you…

Even if the markets take another dive in September, the following three months provide the strongest market returns of the year.  That’s right, October, November, and December are the strongest from a seasonal point of view.

In fact, over the past 20 years, the Dow has ended October and December higher 70% of the time, while it closed November higher 65% of the time.

So get your shopping list ready…

If we do see more market weakness in September, which is highly likely in my opinion, many top tier stocks will be pushed down to even deeper bargain levels.

So if you missed the chance to score a few undervalued stocks during August’s market mayhem, you’re probably going to get another chance.

Of course, that’s a lot easier said than done for most investors…

When markets sell off like they did last month, the last thing many investors want to do is buy stocks… it’s just too scary for most people.

But that’s exactly what you have to do if you want to outperform the market.  Find excellent stocks with solid fundamentals that have essentially been thrown in the trash due to panic selling.

Pick a few of those up and you may just have a very Merry Christmas…

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Category: Stocks

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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