September: Dog days give way to down days

While October is seen as the month market crashes occur, September is the worst performing month across the major indexes: The Dow Jonesand S&P 500 since 1950 and the Nasdaq Composite since 1971. As noted a year ago, this underperformance has accelerated in the 21st Century. Notice how each index posted its worst September in 2001, 2008 and 2000 respectively (see “Vital statistics”). All three of those indexes saw severe downturns in each of those years and the Dow is down 10 of 17 years in this century.

In 2000 and 2008 equity markets were in the midst of major reversals from all-time highs. We are currently at or near all-time highs in all three major indexes and many analysts are expecting a major correction. In 2001, the first year of a new administration with a president from a different party than the previous administration, the Dow and S&P 500 saw a sharp downturn. The recent post-election rally has been attributed to several policy proposals of the new Administration, chiefly a large tax reform package. If one is not passed by Labor Day that could be an impetus for a market downturn.