Crash in September? This will be the best month for investors

September is the worst month of the year for the stock market – but is it really as bad as its reputation? And are investors possibly facing another sell-off? This is what you need to know about the supposed crash month.

September is generally considered the worst month on the stock market. It is even widely known as a crash month because of its poor average performance and the statistically frequent occurrence of market crashes.

These include “Black Friday” in 1869, “Black Wednesday” in 1992, when the pound fell out of the ERM, the attacks of September 11th and the beginning of the financial crisis in 2008. But what is the truth behind the crash month myth and is there a risk of a sell-off this September too?

The cheapest stock market month for investors

At least one thing is certain: September is by far the worst month on the global stock markets. Not only in the S&P500 or the DAX, but on all global stock exchanges, there are on average more losers than winners over long periods of time in the ninth quarter of the year.

In the past, this has led to an average negative return of 0.8 percent in September for the well-known MSCI World Index – in the S&P500 it is even 1.1 percent. At the same time, the month is only positive for globally diversified investors in 40 percent of all cases. But there are no truly scientifically proven reasons for this unique seasonal effect.

September is a repurchase opportunity

However, not everything is bad about the supposed “crash month” of September. In fact, due to its statistical weakness, this period of the year offers ideal opportunities to buy more, as the saying “Sell in May and go away, but remember to come back in September” implies.

The mixed ninth month is followed by the best part of the year on the stock markets in terms of season – the fourth quarter. This not only makes up for the losses of the previous month, but also results in profits well beyond them. This period has proven to be particularly strong in the last 13 years, since 2010.

No crash expected in September

Investors who are still concerned about a potential sell-off can rest assured. Although September is statistically a “crash month”, performance is much better in years in which the US president is elected.

This is often because election years are subject to their own cycle, with September and October showing only a relatively moderate loss and then a significant increase after the election in November. Investors therefore do not have to fear a setback and can use it to make follow-up purchases if it does come as a surprise.

You can find a more detailed description in Euro am Sonntag, where this article first appeared. Click here to go to the magazines

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