Alpha Power Investing Newsletter

September 1, 2017

The Benefits of Treading Lightly in the Month of September
Much of the "edge" offered by Alpha Investment Management's trading strategies comes from recognizing and exploiting long-term seasonal trends in the financial markets. In order to successfully utilize these trends it is essential to understand what they do and do not represent. A given seasonal trend - no matter how consistent and pronounced - should never be considered to be a "sure thing" the next time around. Each occurrence is its own event. Still, a solid long-term edge, if consistently and properly exploited, can go a long way towards helping you to maximize the tradeoff between reward and risk, which is the ultimate goal of investing.
One of the seasonal trends we utilize involves generally avoiding the stock market during the period we refer to as the "Dead Zone", which typically extends from the end of May through late-October. Nowhere is the unfavorable bias associated with this period more pronounced than during the month of September. Note that September is the only calendar month of the year to show a net loss and that it has consistently lost ground over time.
Figure 1 which displays the growth of $1,000 invested in the Dow Jones Industrial Average ONLY during the month of September every year starting in 1897 (using price data only and not total return data).
For the record, during the month of September the Dow:
  • was up 49 times or 40.9%
  • was down (or unchanged one time) 71 times or 59.1%
  • showed an average gain of +3.6% during up months
  • showed an average loss of -4.5% during down months
So we can state that September has seen the Dow decline roughly 3 out of every 5 years, with a slightly larger average loss than average gain. While these numbers are negative, they do not at first blush appear to be overwhelmingly bearish. But the cumulative long-term results over time are fairly stark.
On a cumulative basis:
  • During the month of September the Dow has lost -80.6% since 1897
  • During all other months combined the Dow has gained +372,408% since 1897
2017 is a post-election year. Figure 2 displays the growth of $1,000 invested in the Dow ONLY during the month of September during each post-election year since 1897 (using price data only and not total return data).
This chart actually explains a lot about seasonal trends. Overall, September has gained ground 14 times and lost ground 16 times during post-election years (47% of the time up, 53% of the time down). While post-election year by post-election year results are close to 50/50, the overall long-term result is a cumulative loss of -37%.
Note in Figure 1 that the September performance for the past 14 years "hasn't been too bad." Note also however, that similar multi-year periods of flat to slightly higher performance action have occurred on several occasions in the past. Despite these occasional respites, the long-term results speak for themselves.
There is no way to predict whether the stock market will show a gain or loss during September 2017. But the bottom line is that being out of the stock market during the month of September has been a good long-term strategy for the past 120 years.
To learn more about our strategies, go to the Strategies and Performance page of our website at to read the brochures and fact sheets.

Jay Kaeppel
Vice President and Director of Research
Alpha Investment Management, Inc.

Disclosures: Past performance is not a guarantee of future performance. Indexes are not investment vehicles. The returns illustrated above are not returns of any Alpha strategy and do not include management fees or the cost of funds, trading, or other expenses. To see the impact of these costs, please refer to the net of fees and expenses performance data for specific Alpha strategies. The illustrations above are designed to quantify the effect of certain time periods on representative market indexes. The data used to construct the illustrations were obtained from third-party sources. While Alpha believes the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.

Alpha Investment Management, Inc. is a SEC registered investment advisor. Such registration does not imply a certain skill or training and no inference to the contrary should be made. The information and opinions expressed in this document are for informational purposes only. Any recommendation or opinion made in this document may not be suitable for all investors. The information contained herein does not constitute and should not be construed as investment advice, an offering of investment advisory services, or an offer to sell or a solicitation to buy any security.

© 2017 Alpha Investment Management, Inc.

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