Alpha Power Investing NewsletterSeptember 4, 2018
Sorting Sordid September
Certain things can get ingrained in investors' minds and become "known facts", even though the truth is typically a bit more complicated. Take, for example, the month of September. The month of September has earned a reputation as being a "bad" month for the stock market. Is there any truth to this? And given the stock market's recent strength, does history even matter anymore?
Here's the complicated answer: In the long run, the answer is absolutely "yes". On a year-to-year basis, the answer is "it depends". Now for the backstory.
To get the fullest picture possible we accessed monthly closing prices for the Dow Jones Industrial Average for the past 99 years starting at the end of August in 1919. Figure 1 displays the cumulative price return (using monthly closing price data only, not total return data) achieved by buying and holding the Dow Jones Industrial Average ONLY during the month of September starting in September 1919 through September 2017.
As you can see in Figure 1 the overall results for investing during the month of September have been pretty awful in the long run. For the record, in terms of price performance, an investor who was foolish enough (and stubborn enough) to hold the Dow only during the month of September every year starting with September 1919 would have lost 72% of their initial investment.
For the record, since 1919:
Consider these historical "mathematical facts". From August 31, 1919 through July 31, 2018:
Let's also note that 2018 is a mid-term election year. Figure 2 displays the cumulative price return (using monthly closing price data only, not total return data) achieved by buying and holding the Dow Jones Industrial Average ONLY during the month of September during years that were also mid-term election years (1922, 1926, 1930, etc.), starting in September 1919.
For the record, during mid-term election years since 1919:
Do any of the above "facts" guarantee that the stock market is going to suffer a setback during September 2018? Not at all. The overall market averages remain in a sustained bull market uptrend. Nevertheless, the information shown above reminds us once again that things can change quickly in the financial markets, particularly when the majority of investors are gazing toward the stars.
To learn more about how Alpha's strategies control risk, please go to Strategies and Performance section of our website at www.alphaim.net to read the brochures and fact sheets.
Disclosures and Disclaimers: Past performance is not a guarantee of future performance. The returns illustrated in Figure 1 and Figure 2 do not represent actual trading and is not representative of any Alpha Investment Management strategy. The data does not include management fees or the cost of funds, trading, or other expenses. The illustrations are designed to quantify the effect of certain time periods (as specified) on the Dow Jones Industrial Average. Indexes are not investment vehicles and persons cannot invest directly in an index. The Dow Jones Industrial Average is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities. The data used to construct the illustrations was 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.
© 2018 Alpha Investment Management, Inc.