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Posted on 2 September 2011 | 4,702 views

Looking at a Spooky September 2011 Stock Market

The Jackson Hole Federal Reserve meeting has come to a close and now investors face a treacherous September in the stock market.

This September is likely to be particularly volatile as Federal Reserve Chairman Ben Bernanke deferred any new simulative action until the now two-day Fed meeting on September 20 and September 21, 2011.

Also, International Monetary Fund leader Christine Lagarde said the global economy was in a dangerous phase while Kansas City Fed President Thomas Hoenig, said last week that the Fed, “can’t do it all,” adding further to the uncertainty facing us as we leave the dog days of summer behind.

Seasonality also points to a rocky ride ahead as Septembers are historically the “Worst Performing Month for the Stock Market” — since 1928, September has recorded more down months than any other month and also holds the record for the worst monthly drop in history which came in September, 1931, when the Dow lost -30%. Septembers can be an “up” month, but the percentage of positive Septembers is the lowest of any month on the calendar.

Beyond September, of course, comes the notorious month of October which is known for major stock market crashes including Black Monday on October 19, 1987, and Black Monday on October 28, 1929. Based on historical performance for September and October, it’s easy to conclude that the next couple of months could be a wild ride, indeed.

With troubling seasonal factors, negative economic reports and a schizophrenically volatile stock market, it’s no wonder that little guys like us feel dazed and confused.

All in all, it looks like a precarious period ahead, and, as the old saying goes, sometimes the “best offense is a good defense.” In my opinion, caution would seem to be the most prudent course to steer as we say goodbye to Jackson Hole and head into the potential shoals of September.

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