by Jason Bodner

September 8, 2021

Jason Bodners Opening Remark

I associated September with “back to school” and fall as a kid, but most of the month is summer-like, especially here in Florida. Coincidentally, September is the only month spelled with the same number of letters as its calendar position: 9. It wasn’t always that way, though. Its Roman name comes from the Latin root “SEPT,” which means 7, because September was the seventh month on the Roman calendar. (It’s the same numbering system for the next three months in Latin: OCT = 8, NOV = 9 and DEC = 10.)

Fall usually starts around the 22nd or 23rd of September, when there are almost equal hours of light and dark in a day. But most importantly, September hosts some little known but vastly important American holidays like National Cheese Pizza Day and National Drink-a-Beer Day, so September sounds like a generally happy time: Falling leaves, cooling temps, and Pizza and Beer holidays to boot!

But when it comes to stocks, September is a notoriously weak month. So today I’ll look at seasonality in markets and examine what we might expect from the 7th – wait, the 9th – calendar month and beyond.

The good news is that looking back, we can expect just about any given month to give us a nice return when investing in stocks. The bad news is that returns aren’t evenly distributed. While September stinks for stocks, historically, the month isn’t bad lately. Below we see a table summarizing the average monthly returns for four major stock indexes over the span of the last 31 years. (CODE: DJIA = Dow Jones Industrial Average, COMP = NASDAQ Composite; RUT = Russell 2000 and S&P 500 is obvious)

MAPSignals Monthly Returns Table

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Even with a bad September, we wrote a few weeks back that we could expect the September-December span to provide us with rosy returns, looking at the last 25 years. That’ true over 31 years, too:

MAPSignals Monthly Returns Table1

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

But things look really nice when we remove September and look at the Fourth Quarter alone:

MAPSignals Monthly Returns Table2

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Louis Navellier says we should close the market in August. Maybe we should close it in September too.

Not so fast. It turns out that September has its own split personality. When we divide the month in two, we see that it’s a tale of two halves. I was sure I would see a weak first half with a strong second half. But I was surprised to find the first half of September is strong while the second half is weak. And this is true so far – as the first three days of September are showing us strength, keeping with the 31-year trend:

MAPSignals Monthly Returns Table3

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

OK, it’s decided then: September can take a hike, for all we care. Maybe everyone hates going back to school (or work). But before we write off the month based on three decades of history you may want to know this: September was about 50/50, as 16 of 31 Septembers were negative. And some Septembers were so infamously bad that they skewed the results badly. Here we have all the Septembers since 1990 listed, with terrible Septembers falling in 1990 and 2000 through 2002, then in 2008 and 2011.

MAPSignals Monthly Returns Table4

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

But look what happens if we remove just 2001 and 2002:  We flip-flop to a strong month.

MAPSignals Monthly Returns Table5

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

In fact, if we plop these results into our monthly chart before we see a different picture:

MAPSignals Monthly Returns Table6

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

I think all of us wish we could just erase certain moments (or months) of our lives… if only. But alas we can’t, so wiping away two bad market months is not realistic. Will this September be a miss-worthy month? We may find clues in August. Normally, August is blah to weak. But this year, the month was surprisingly awesome. By now we should know history is a guide to what could be, not what will be.

MAPSignals Monthly Returns Table7

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Before you feel frustrated – like we didn’t get anywhere – let’s try and frame up a context for what is likely coming. For that, we should look to Big Money investors. The simplest gauge for that is the Big Money Index (BMI), which essentially is a money flow indicator. When it goes up, we typically expect higher prices in the market. When it falls, we typically expect lower markets. Below is a chart of the BMI:

BIG Money Index Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Remember that August’s falling BMI did not correspond with a falling S&P 500, though two indexes fell:

BMI Small Table

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Last month saw the BMI correlate to the Russell 2000 as there was a rotation into large cap out of small caps. But what’s interesting about the chart above is the sudden trough of the BMI: since August 19th it’s been up and away. And what’s more interesting to me is what is getting bought. Last week saw huge buying in Real Estate, technology, Communications, and Healthcare stocks. These are stocks that have felt the pressure over the frustrating summer months – and also headed into Labor Day weekend.

MapSignals Sector Rankings Table

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

This is a decidedly bullish setup for the end of the year. We have a September that looks to be ready to buck the trend. And then we have a seasonally strong fall to look forward to.

For inspiration, remember the chart above of the fourth quarter over the last 31 years:

MAPSignals Monthly Returns Table8

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

People accuse me of always being bullish. It’s funny, though: When I get bearish, even when backed by the strength of data, it still pays to be bullish. Just last month the data said stocks were headed lower. And just like that, they changed their minds. Stocks reward holders over the long run. Here’s one more chart to prove that. Look at the average annual returns for the major indexes over 31 years:

MAPSignals Monthly Returns Table9

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Short-termers use history to expect an ugly September, but long-termers and data junkies like me look forward to this 7th (9th) month to buck the trend. Long-termers don’t care and want to just buy and hold. I’m in that camp. I’m buying any great growth stock on sale and looking forward to an end of year lift.

And for you in Scotland, don’t sweat any of this seasonal analysis. According to comedian Billy Connolly, “There are only two seasons in Scotland: June and Winter.”

All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.

Please see important disclosures below.

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About The Author

Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT

Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation/distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner

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Jason Bodner is a co-founder and co-owner of Mapsignals. Mr. Bodner is an independent contractor who is occasionally hired by Navellier & Associates to write an article and or provide opinions for possible use in articles that appear in Navellier & Associates weekly Market Mail. Mr. Bodner is not employed or affiliated with Louis Navellier, Navellier & Associates, Inc., or any other Navellier owned entity. The opinions and statements made here are those of Mr. Bodner and not necessarily those of any other persons or entities. This is not an endorsement, or solicitation or testimonial or investment advice regarding the BMI Index or any statements or recommendations or analysis in the article or the BMI Index or Mapsignals or its products or strategies.

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