The S&P 500 declined 0.32% today, but the index is 61.3% above the March 9th close, which is 30.3% below the peak in October 2007. Here is a StockCharts.com snapshot showing the relationship of the S&P 500 to its 50- and 200-day simple moving averages.
Click here to review the previous rallies during the current bear market, and here's a table showing the 1929-1932 Dow rallies.
Since inflation is a favorite topic on this website, I now regularly update a set of charts to facilitate a comparison of the nominal and real declines. See also my logarithmic scale view of the "Four Bad Bears" comparison.
For charts of other bear market recoveries, see The Bear Bottoming Process.
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This chart is an offshoot of my Four Bad Bears. It shifts the point of alignment from the pre-bear highs to the bear bottom in the Oil Crisis and Tech Crash, the first major low in the 1929 Dow, and the March 9th closing low for our current Financial Crisis.
As the chart illustrates, the S&P 500 lows in 1974 and 2002 marked the beginnings of sustained recoveries. The Dow low in 1929 failed 11 months later.
Here is the same chart adjusted for inflation.
For a more optimistic alternative view, suggested by an investment professional and visitor to this website, see this post.
It's the third Thursday of November — the day the Rule Your Retirement mid-month update is posted. The latest one is entitled What the People You Wish You'd Listened to Back Then Are Saying Now. Who are the people?
As regular visitors to this website know, I'm a frequent contributor to Rule Your Retirement, and I routinely "stroll" the RYR discussion boards as TMFDoug.
Like many blogs, my dshort.com website has context-sensitive ads controlled by a third party. Rule Your Retirement is the exception. It has my full endorsement. If retirement planning is a topic you want to know more about, consider a 30-day free trial.
Here's a new update of our preferred market valuation method using the latest Standard & Poor's earnings estimates and the index price as of November 18.
The latest annualized rate is -0.18%.
The October 2009 Consumer Price Index for Urban Consumers (CPI-U) is 216.177. The annualized inflation rate computed from this number is -0.18%, which marks the eighth consecutive month of deflation. However, the rate of deflation has steadily eased over the past four months from -2.10% in July, -1.48% in August, -1.29% in September, to the current -0.18%.
Note: The Alternate CPI puts the annualized inflation rate at 7.13%. This number comes from the ShadowStats.com pre-1982 calculation method.
The Bureau of Labor Statistics (BLS) began calculating the CPI in 1913 (BLS historic data). Our chart now shows inflation back to 1872 by adding Warren and Pearsons's price index for the earlier years. The spliced series is available at Yale Professor Robert Shiller's website. This look further back into the past dramatically illustrates the extreme oscillation between inflation and deflation during the first 70 years of our timeline.
Historical Inflation Data
Overview: Inflation, recessions and the S&P 500
Table: Monthly & annual inflation data since 1946
Alternate Inflation Data This chart includes an alternate look at inflation without the calculation modifications the '80s and '90s (Data from www.shadowstats.com).
For a fascinating perspective on inflation and the adjustments to the official calculation method, see these videos from ChrisMartenson.com.
The November 2009 CPI is scheduled for release on December 16, 2009.
Today is the last day of our two weeks in Hawaii. The third leg of our 17-hour return journey will bring us home to the Carolinas on Tuesday evening, so my daily postings will be delayed yet again tomorrow. After that, I hope to be back on schedule.
The photo here of Kauai's Spouting Horn blowhole shows that, contrary to my previous post, under thre right conditions water, like the market, can defy gravity (ht to Bill Reece for this bit of wisdom).
Cheers,
Doug
A vistor to the website pointed out a curious comparison between Waipoo Falls, in Kauai's Waimea Canyon, which I highlighted in a vacation snapshot, and the S&P 500 after the Lehman collapse.
Interesting, perhaps, but I wouldn't push the comaparison too far. Water doesn't flow uphill in nature.
Obviously the same laws of gravity don't apply in the stock market.
Cheers,
Doug
It's time again for the weekend update of our "Real" Mega-Bears, an inflation-adjusted overlay of three secular bear markets. It aligns the current S&P 500 from the top of the Tech Bubble in March 2000, the Dow in of 1929, and the Nikkei 225 from its 1989 bubble high.
This series is consistent with my preference for real (inflation-adjusted) analysis of long-term market behavior. The nominal all-time high in the index occurred in October 2007, but when we adjust for inflation, the "real" all-time high for the S&P 500 occurred in March 2000.
This chart series now includes a nominal version to help clarify the illusion of market performance created by inflation.
For those who prefer the overlay aligned with the 2007 S&P 500 peak, here is our nominal Mega-Bear Quartet charts and commentary.
The monthly unemployment rate for October rose to 10.2% — up from 9.8% in September. The current rate is the highest since the 6-month period from October 1982 to March 1983, during which unemployment peaked at 10.8%. The chart here shows the pattern of unemployment, recessions and both the nominal and real (inflation-adjusted) price of the S&P Composite since 1948.
Unemployment is usually a lagging indicator that moves inversely with equity prices (see chart). Note the increasing peaks in unemployment in 1971, 1975 and 1982. The inverse pattern becomes clearer when viewed against real (inflation-adjusted) S&P Composite, with its successively lower bear market bottoms. The mirror relationship seems to be repeating itself with the current and previous bear markets.
The start date of 1948 was determined by the earliest monthly unemployment figures collected by the Bureau of Labor Statistics. The best source for the historic data is the Federal Reserve Bank of St. Louis.
The lead article in the latest Rule Your Retirement newsletter, published yesterday, is entitled "Diversify to Beat the Bear." RYR leader Robert Brokamp, a Certified Financial Planner, examines the grueling bear market from the mid 1960s to 1982 for clues about the effectiveness of diversification during a secular bear market. He asks the question "Did diversification pay off?" and reviews the results of three different asset mixes for three types of investors:
As regular visitors to this website know, I've been a frequent contributor to the Motley Fool Rule Your Retirement subscription service, and I routinely "stroll" the RYR discussion boards as TMFDoug.
Like many blogs, my dshort.com website has context-sensitive ads controlled by third parties. Rule Your Retirement is the exception. It has my full endorsement. If retirement planning is a topic you want to know more about, consider a 30-day free trial.
Was March 9th the end of a secular bear market in the S&P 500, or is there more downside to come? Without crystal ball, we simply don't know.
One thing we can do is examine the past to broaden our sense of the range of possibilities. An obvious feature of this inflation-adjusted chart of the S&P Composite is the pattern of long-term alternations between up- and down-trends. Market historians call these "secular" bull and bear markets from the Latin word saeculum "long period of time" (in contrast to aeternus "eternal" — the type of bull market we fantasize about).
If we study the data underlying the chart, we can extract a number of interesting facts about these secular patterns:
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It will be interesting to watch how the S&P 500 interacts with the 50-day moving average this week. Last week the index oscillated around the 50-day MA, closing the week below this popular indicator. The Monday intraday high came within a hair of the 50-day MA before falling back — still closing in the green. Will the 50-day MA, which provided support in early October, now offer resistance?
We'll post the occasional Stockcharts.com snapshot to see how this "encounter" plays out.
Here is a series of real (inflation-adjusted) monthly close charts of the Nikkei 225 and the S&P 500 since 1970 with their respective annualized rates of inflation shown below. This series also includes an overlay chart with the two index peaks aligned. The overlay retains Japan's inflation to illustrate a point discussed later in this post.
The left sides of the two bubbles are remarkably similar. More conspicuous, however, are the dissimilar contours of the post-bubble declines.
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I've occasionally featured technical commentary from Serge Perreault, a Chartered Accountant located near Montreal, Canada. Serge has some fascinating observations about the market behavior going into Halloween. Here's a chart he shared with me this morning.
This past week I've noted that the S&P 500 has twice dipped below the 50-day moving average, where it currently resides. Serge points out a couple of additional negative technical developments — appropriate Halloween reading!
The S&P 500 closed the month of October 2% below the September close. However, all three of the monthly moving averages we've been tracking continue to favor equities.
Since 1950 the S&P 500 10-month SMA has had 41 buy signals; 26 of them (63.4%) led to a gain before the next sell signal, 15 of them (36.6%) led to a loss. The 12-month SMA has had 31 buy signals, 21 (67.7%) led to a gain before the next sell signal, 10 (32.3%) led to a loss. These moving-average signals have a good track record for long-term gains while avoiding major losses. But they're not fool-proof.
| Note: I've also update the Stockcharts.com charts for the five ETFs in the Ivy Portfolio. You can always click the Ivy Portfolio link in the left column for the most recent month-end charts with 10- and 12-month SMAs.
Bonus Feature: For anyone who would like to see the 10- and 12-month simple moving averages and the equity-versus-cash positions since 1950, here's an Excel file (xls format) of the data. My source for the monthly closes (Column B) is Yahoo! Finance. Columns D and F shows the positions signaled by the month-end close for the two SMA strategies. |
Yesterday I updated my chart of the S&P 500 and the 50-day moving average. We saw our favorite index surge 2.25% to rise back above this benchmark indicator.
Today the S&P 500 had a 2.81% selloff, taking it back below the 50-day MA — a disappointing way to end the week. And unfortunately the volume was 15.4% higher than yesterday's advance. We'll post the occasional Stockcharts.com snapshot as this "encounter" plays out.
Yesterday I revisited a chart of the S&P 500 and the 50-day moving average. We saw our favorite index plunge beneath that benchmark indicator.
Today the S&P 500 advanced 2.25%, bringing it back above the 50-day MA. Encouraging? Yes. The one caveat is that the S&P 500 volume was 13% lower than yesterday's selloff. We'll post the occasional Stockcharts.com snapshot as this "encounter" plays out.
Earlier this month I featured a chart of the S&P 500 and the 50-day moving average. We saw that benchmark indicator provide classic support for our favorite index.
Today the S&P 500 dropped decisively through the 50-day MA. Over the next few days market technicians will be watching the follow-on behavior. Will the selloff accelerate? Or will today's 2% decline prove but a brief dip below this classic indicator? We'll post the occasional Stockcharts.com snapshot as this "encounter" plays out.
Update: The selloff today was on increased volume — the highest since the September monthly close.
Note: The latest Standard & Poor's earnings spreadsheet (October 14) puts the annualized dividend yield at 2.19% and the indicated rate at 1.97% (The indicated dividend is the estimate for the next four quarters, based on what was paid in the most recent period).
Note: This update includes a new chart showing the long-term inflation-adjusted growth of dividends compared to equities.
The bottom of the 1982 bear market was a major turning point for stock dividends. For more than a century, the market's dividend yield had averaged nearly 5%. But since 1982 the yield has essentially been cut in half, falling as low as 1.1% in 2000. (See the chart.)
What happened? Investors shifted their focus from income streams to price appreciation. As a first-wave Baby Boomer, I see this shift as a result of three things:
A New Investor Class
The 401(k) plan was introduced in 1980. The following year the Economic Recovery Tax Act permitted all employees, in addition to those not covered by an employee retirement plan, to contribute to an IRA. The result has been the massive growth of a new investor class with a limited understanding of markets and risk. The bulge of Boomers became a windfall for Wall Street (the oldest having just turned 35 in 1981).
The popularity of tax-deferred savings vehicles reduced the appeal of dividend income. The goal of retirement savings is to grow the nest egg. Thus, the distinction between dividend yield and price appreciation quickly lost relevance. New companies saw little need to pay dividends. Many existing companies reduced their dividends and redirected those earnings to corporate growth (not to mention executive compensation).
More...
It's the third Thursday of October — the day the Rule Your Retirement mid-month update is posted. The latest one is entitled You Can't Enjoy Retirement If You're Dead. What's that all about? A topic that rhymes with "wealth" and increases the odds you'll be around to enjoy your retirement.
The update also includes a link to the inaugural quarterly issue of Champion Funds authored by Amanda Kish, a Certified Financial Analyst and the Motley Fool resident mutual fund expert. Topics include:
As regular visitors to this website know, I'm a frequent contributor to the Motley Fool Rule Your Retirement subscription service, and I routinely "stroll" the RYR discussion boards as TMFDoug.
Like many blogs, my dshort.com website has context-sensitive ads controlled by a third party. Rule Your Retirement is the exception. It has my full endorsement. If retirement planning is a topic you want to know more about, consider a 30-day free trial.
Yesterday I posted an item on one of the Motley Fool Rule Your Retirement discussion boards summarizing a provocative Time.com article entitled Why It's Time to Retire the 401(k). I was typically non-committal in my post, and another regular contributor challenged me: Doug, what are you suggesting?
I thought I'd share the gist of my reply here.
Over the past several decades, our culture has begun to face an unprecedented threat on a massive scale — longevity risk. There are several direct and indirect factors:
During the summer I featured some commentaries on trading volume during bear market bottoming processes (1929, 1973, and 2000) to get some perspective on the current price-volume relationship.
Today, let's reexamine the topic from a technical perspective, courtesy of some analysis provided previously by Serge Perreault, a Chartered Accountant located near Montreal, Canada. Serge points out that all our charts exhibit some form of Inverse Head And Shoulders (IH&S) formation. As the Investopedia link explains, "Many traders will watch for a large spike in volume to confirm the validity of the breakout."
Here's an annotated chart of the Dow Crash of 1929 and the following rally. The IH&S was a second-take affair. The first breakout above the neckline aborted. About six months later a second breakout succeeded. The heavier volume powered the second rally.
The recovery from the 1973 oil crisis was a simpler IH&S pattern. With the breakout, volume increased and maintained the elevated levels for six months or so.
Like the Crash of 1929, the initial rally off the bottom of the Tech Crash aborted. A more successful rally came six months later. Volume was a factor, although less so than in the two earlier illustrations.
Which brings us to today's market. We've had breakout above the neckline of an IH&S pattern but with low volume compared to the sharp increase in price. The rally above the neckline has been sustained for nearly three months. But the generally decreasing volume is a bit troubling.
We shall see.
Yesterday I posted an item on one of the Motley Fool Rule Your Retirement discussion boards about a fascinating CNNMoney article entitled How much risk can you stand? The article elaborates upon four basic ideas:
As regular visitors to this website know, I've been a frequent contributor to the Rule Your Retirement subscription service, and I routinely "stroll" the RYR discussion boards as TMFDoug.
Like many blogs, my dshort.com website has context-sensitive ads controlled by third parties. Rule Your Retirement is the exception. It has my full endorsement. If retirement planning is a topic you want to know more about, consider a 30-day free trial.
Here's an update of a chart I posted in early June comparing two secular bear markets — the current decline since the peak in March 2000 and the S&P 500 from its peak in 1968 to its bottom in 1982. Both are adjusted for inflation using the Bureau of Labor Statistics' Consumer Price Index. The chart excludes dividends.
Most people, even first wave Boomers, don't realize the savagery of that earlier 14-year decline other than perhaps a recollection of the decade of stagflation that started with the 1973 oil embargo. The chart illustrates how both bears behaved over a nine-year period following their peaks and how the stagflation bear continued its race to the bottom for another four-and-a-half years.
It will be interesting to check back in four-and-a-half years to see who wins.
The selloff last week dropped the S&P 500 fractionally below the 50-day moving average (MA), with Friday's close just a hair above the line — appropriately red on our Stockcharts.com snapshot. Today this bellwether MA gave us a good bounce, although on fairly slender volume.
Will the 50-day MA continue to provide support? We can entertain ourselves with this bit of technical trivia while waiting for Alcoa to kick off the third-quarter earnings season on Wednesday.
A few days before I posted my latest market valuation update, an email arrived with the following question:
Your chart excludes long bond yields, whereas Robert Shiller includes this data in his spreadsheet. Do you exclude in order to prevent the chart from getting too busy? Or do you think interest rates are reflected in the chart indirectly, via the P/E ratio?
The reference is to the spreadsheet generously shared by Professor Robert Shiller on his Yale website. It includes a chart of the P/E10 ratio and the interest rate on 10-Year Treasuries, an earler version of which appears as Figure 1.3 in the opening chapter of his Irrational Exuberance. In the book Shiller points out the negative correlation between yields and the P/E10 ratio from 1982 to the market peak in 2000. But he also remarks that, over the long haul, the relationship between interest rates and the P/E ratio isn't very strong.
The chart I use in my regular market valuation feature does not include Treasury yields because my focus is the long-term correlation between the P/E10 ratio and market valuation. Adding the Treasury series introduces complexities beyond my topic, and it would be difficult to read atop the P/E10 quintile analysis. Also, since the correlation between the S&P Composite and the P/E10 ratio is so close, charting both against bond yields is a bit redundant.
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The lead article in the latest Rule Your Retirement newsletter, published today, is entitled "Get a Plan." RYR leader Robert Brokamp, a Certified Financial Planner, explains the five steps in sound retirement planning, and he introduces a new feature on the RYR website available to subscribers. It's a comprehensive set of resources on the following:
As regular visitors to this website know, I've been a frequent contributor to the Motley Fool Rule Your Retirement subscription service, and I routinely "stroll" the RYR discussion boards as TMFDoug.
Like many blogs, my dshort.com website has context-sensitive ads controlled by third parties. Rule Your Retirement is the exception. It has my full endorsement. If retirement planning is a topic you want to know more about, consider a 30-day free trial.
Now that October has arrived, here's its entry in our monthly behavior series!
Each bar in the chart shows the October close change from the September close. Since 1928 October closes have an average gain of 0.27%, but the month has also been home to a few bear bottoms. Of the eight previous bear markets since 1950, four of them hit their low in October (1957, 1966, 1974 and 2002).
For previous posts on seasonality, see August and September and also my "Behavior of the Months" series: Part 1, Part 2 and Part 3. For an interesting international website with more detail on seasonality and the driving forces behind it, see seasonalcharts.com.
I've received several emails asking why my S&P 500 moving average charts only go back to 1995 even though I frequently mention the data since 1950. There are two reasons: 1) the charts are primarily intended to illustrate the principle, and 2) 59 years of crossovers wouldn't be legible on the typical computer screen.
For those who would like to see the 10- and 12-month simple moving averages and the equity-versus-cash positions since 1950, here's an Excel file (xls format) of the data. My source for the monthly closes (Column B) is Yahoo! Finance. Columns D and F shows the positions signaled by the month-end close for the two SMA strategies.
Simon from Maui emailed me last week about my recent post on federal debt and tax brackets:
Your chart triggered my pet peeve about certain graphs being on a linear scale when they should be plotted on a log scale. The problem is that growth over long periods makes many linear plots resemble a "hockey stick" when they really aren't. Also the nuances of what happened far back in time are often lost because the early part of the curve is under-represented.
Simon is right. Here's the same chart on linear and log scales.
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Last week I posted an item on the Federal Debt and Tax History, which was a follow-up to a post on the Federal Debt and the S&P Composite.
I've received several emails with various chart suggestions for federal data — more than I can accommodate. From time to time, however, I'll expand this series with new additions.
Today's chart is an overlay of the historic tax brackets and the federal budget surpluses and deficits since 1900. The dotted line shows the Office of Management and Budget (OMB) estimates for 2009 to 2014. The unprecedented current budget shortfall is, of course, the ongoing effect of the financial crisis. It will be interesting to look back in a few years to see if the OMB estimates were accurate or optimistic:
Yesterday an item at CNNMoney.com reiterated the commonplace warning about the skyrocketing federal debt. The CNN article prompted me to place the U.S. debt since 1900 in a historical context by overlaying it on a chart of tax brackets since the introduction of federal taxes in 1913, a topic previously discussed here.
There are enough debt clocks on the Internet that most people simply tune them out. The purpose of this chart is to offer a somewhat different perspective by highlighting two points:
Update: For a global perspective on debt from 1999 projected to 2011, see this interactive feature from The Economist.
This morning I received an email from Michael in Coleford, Gloucestershire, UK, commenting on our "Real" Mega-Bear 2000 series:
I think it is right to take the top of the Tech Bubble in March 2000 as the starting point. I have not yet seen this anywhere else. When the 2000 crash came the plunge was halted in its tracks by the new round of debt creation. Given the scale of the actions that were taken and the readiness of people to borrow it's not surprising that the rebound was better than the other bears.
I understand why you like inflation-adjusted measures, but for the sake of completeness could you do this chart without the inflation adjustment? Apart from anything else I don't know which inflation measures to trust anymore! I would really like to see the chart as raw indices.
Thanks for the suggestion, Michael. Here's the nominal version of the two-decade version of our Mega-Bear 2000.
The S&P 500 has rallied to a new interim high 52.7% above the March 9th low. Actually the index first topped the 50% mark on August 21st — approximately 24 weeks after the March low.
When was the last time we had such a speedy 50% rally? Here's a chart of the S&P Composite since January 1928, which is as far back as I have daily data for this index. These 24-week wonders are highlighted in red. Not since 1932, near the bottom of the Crash of 1929, have we seen such dramatic gains.
One interesting difference between then and now is the relative market valuation. The P/E10 ratio, which we regularly follow, was 5.6 at the 1932 low. This is the single-digit range of historic secular market bottoms. The P/E10 was 13.4 in March, just marginally below the middle quintile of valuations.
During the summer I've occasionally looked at volume in the S&P 500 for clues about market behavior (for example here and here).
Volume in our current market, however, appears to be a less reliable indicator than in the past. I've seen several claims that trading in five beaten-up financial stocks has dominated market volume. A quick Google search led me to this article by Tyler Durden.
I was intrigued. So I decided to investigate further.
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Earlier today I received an email from Rebecca Mitchell, an Investment Analyst at iimia Wealth Management in the UK with an irresistible suggestion:
I was looking at the Short History of Stock Dividends. I like the chart, but was wondering if it would be possible to provide an updated one with two different exponential regression trend lines, one for each period (1870-1982, and 1983-present) to match the two averages for the dividend yield?
If one is to think of the focus on dividend yields as having shifted, the focus on price might also have shifted!
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Yesterday I posted an updated pair of charts showing the danger of overconfidence in equity diversification as an investment risk-management strategy. Here is a simpler illustration of the value of holding a fixed income allocation and increasing that allocation as retirement approaches, especially if you're counting on your nest egg to fund non-discretionary retirement expenses.
Of course, if your other sources of income — Social Security, pensions, and that bequest from Aunt Susan — will cover all your needs, then no need to fret over a decade or two of portfolio pain. Otherwise, it makes sense to balance risky assets with an appropriate, age-adjusted ratio of fixed-income assets. This will help, as we pointed out previously, to reduce the odds that a market implosion in retirement has you dining on cat food
This latest update shows some recovery of the diversification effect in the equity classes, although the most conspicuous equity variance is the relative underperformance of the REIT index.
How do we protect against these infrequent but destructive events? First we need to understand that they do happen — a reality this website has endeavored to illustrate over the past 18 months. Followers of buy-and-hold investing need to balance risky assets with an appropriate, age-adjusted ratio of fixed-income assets in their portfolios. This will help to minimize the chance that a market implosion near or in retirement is a life-changer.
Another approach is to employ a tactical asset allocation strategy that attempts to reduce equity holdings when the market appears significantly overvalued or when it is trending down. Both of these conditions, market valuation and moving averages, are periodically addressed at this website.
Regular visitors to this website will recall last month's technical analysis of market volume provided by Serge Perreault, a Chartered Accountant located near Montreal, Canada.
This morning Serge sent me an annotated copy of yesterday's "Road to Recovery" chart with his technical observations on the current market recovery. If I read his comments correctly, a decline to the previous resistance level would take the index to the vicinity of 950-955. Interesting — we'll keep an eye on this.
Earlier this year professors Barry Eichengreen (UC Berkeley) and Kevin H. O'Rourke (Trinity College Dublin) presented a fascinating series of data comparing the the current financial crisis to the Great Depression.
Their latest update, posted yesterday, suggests that world industrial production, trade, and stock markets are showing signs of recovery. However, a pivotal question remains, and it is one on which the hope for a sustained recovery hinges:
This is a sharp divergence from experience in the Great Depression, when the decline in industrial production continued fully for three years. The question now is whether final demand for this increased production will materialise or whether consumer spending, especially in the US, will remain weak, causing the increase in production to go into inventories, leading firms to cut back subsequently, and resulting in a double dip recession.
So what does the future hold? Will consumers return to former spending habits? Or is there a grain of truth in retail expert Howard Davidowitz's histrionic prediction that consumers and retailers are "in the tank forever"?
Davidowitz obviously overstates his case. "Forever" is a long time. But I think it likely that US consumption may indeed undergo a generational change. The process will be driven by the continuing need to reduce personal debt, and it will be exacerbated by the demographic impact of the aging boomers and their need to defer some of their discretionary consumption to fund the non-discretionary expenses of their senior years.
About the only certainty in the stock market is that, over the long haul, overperformance turns into underperformance and vice versa. Is there a pattern to this movement? Let's apply some simple regression analysis to the question.
Here's a chart of the S&P Composite stretching back to 1871. The chart shows real (inflation-adjusted) monthly averages of daily closes. We're using a semi-log scale to equalize vertical distances for the same percentage change regardless of the index price range. The regression trendline drawn through the data clarifies the secular pattern of variance from the trend — those multi-year periods when the market trades above and below trend.
Bearish and Bullish Interpretations: More...
When we measure monthly performance as a percent gain or loss from the previous monthly close, September has the distinction of being the worst performing month in the S&P 500 since 1928, which is far back as I have S&P monthly close data.*
Each bar in the chart shows the September close change from the August close. Since 1928 September closes have averaged -1.27%. The only other month with a negative average change is February, with a -0.31% over the same timeframe.
For previous posts on seasonality, see August and also my "Behavior of the Months" series: Part 1, Part 2 and Part 3. For an interesting international website with more detail on seasonality and the driving forces behind it, see seasonalcharts.com.
For selected articles previously posted, click here.
For a partial list of dshort contributions to The Motley Fool, click here.
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