The long-term upward trajectory of the U.S. stock market is tied to the country's democratic political system and its market-based, capitalist economic system. In theory, the stock market efficiently allocates capital and generates solid returns. And then there is September. Our analysis of monthly returns going back to 1980 indicates September is one of only two months (with August) with an average loss. Not every September is negative, and the month has a "win percentage" of 47%. But there have been some bombs, including 1986 (-8.5%), 2001 (-8.2%), 2002 (-11%), 2008 (-14%) and 2011 (-7.2%). In September, corporations get back into gear and the IPO market typically picks up. The Fed usually meets, which can add to volatility. And, sometimes ominously, the third-quarter earnings season approaches. By the end of 3Q, companies are pretty sure whether or not they are on track to meet financial targets. If they are not, and they pre-warn, investors can be quick to sell. This September, market fundamentals appear intact and the VIX volatility index is not far from all-time lows. Yet while all may seem calm, history indicates September can be rocky.
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