Awful Sep but good days ahead likely in Oct, Nov, Dec and Jan

Sep has been an awful month. Major stock markets around the world declined significantly. Even the US markets which have been on a phenomenal and relentless upward climb also crumbled. S&P dropped almost 5% in Sep alone. In the other two markets that I am vested in – HK and SG, they were no exceptions. In fact, 3Q has been the worst performing quarter this year – HK dropped 15%, SG dropped 5% and S&P just marginally above water.

Sep – No surprise that it is a terrible month for equities

But after googling a bit on historical stock market performance, I found that we should not be surprised by what we saw last month.

Based on Moneycrashers.com, they shared a breakdown of the performance of the S&P 500 by month over the past 92 years and YES, you can see that Sep is the worst month in the year for equity investment:

MonthYears UpYears DownAverage Monthly Returns
January57351.2%
February4844-0.1%
March55370.5%
April59331.5%
May5339-0.1%
June52400.8%
July54381.6%
August53390.6%
September4249-1%
October54380.4%
November56360.8%
December57251.3%

And according to them, the three reasons for the Sep to underperform the rest of the months are:

(1) Profit Taking – Historically, people like to restructure their portfolios and cash in on their profit in Sep.

(2) Tax-loss harvesting – apparently mutual funds (in US and Europe?) like to cash in in Sep too to do tax loss harvesting to lighten the tax burden associated with gains throughout the year by selling off other assets that have declined.

(3) Investor Vacations – Sep is also the favourite month for Europeans and Americans to take their vacations. Hence, there would be fewer players in the market to prop up the stocks. Furthermore, they may actually cash in on their profits to go for holidays.

Take Heart – The worst may be over

Yes, looking at the same table, you would see that Oct, Nov, Dec and Jan are expected to improve our returns from stock. And the even better news is that it will get better and better, peaking in Dec and Jan. A good 4 months of rally !!!! I can’t wait for this to happen.

If this is true, then end Sep, early Oct (now !!!) could be the best month for us to buy and accumulate quality stocks and make some trading profit by the time of Chinese New Year in early 2022.

Have you done yours? I did some with the limited cash that I have. I am keeping my fingers crossed that this will come true.

Net worth

As mentioned earlier, Q3 was the worst performing quarter for major stock markets. As a result, my net worth did not increase from end Jun to end Sep despite investing my savings from salary and dividends into the market. This is extremely disappointing.

However, when I look back in 2020 and 2019, the same thing happened ! The end Q3 net worth actually declined when compared to end Q2.

And the good news is that for both years, end Q4 net worth had increased with reference to end Q3 and even exceeded end Q2. So, I am hopeful that the same thing would happen again.

Keeping fingers crossed. In stock market, we can only hope as we would never know what would happen tomorrow. A black swan event may just turn up suddenly.

Good luck and all the best to us. May we take the opportunities as they drop on us.

Stay safe and have a great investment week ahead.

Regards,

Warriortan

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