August is traditionally a weak month for stocks and that proved true this year with the S&P 500 down 2.4% this month. The good news is that August is almost over but the bad news is that September is even worse.
Here is what we know:
September is by far the worst month for stocks. People point to seasonal depression at the start of fall and tax-loss selling as reasons but there is no consensus. With the Fed taper and US debt ceiling debate upcoming, there are plenty of reasons to think this year could unfold with the same pattern.
This is a heatmap of gains/losses in the S&P 500 by month:
gains/losses in the S&P 500 by month
Alone, you would think that is good news for the US dollar but September is also the second-worst month for the Dollar Index after December. Other currency seasonal patterns to consider in September.
- USD/JPY tends to falter in Sept. The 30-year average is a 0.9% loss and the pair has declined in 5 of the past 6 Septembers.
- Sept is the second-best month for EUR/USD with an average gain of 1% since the euro’s creation.
- Sept is a flattish month for cable, historically
- Seasonals point to a potential bottom in AUD/USD as Sept, Oct, Nov and Dec are 4 of the top 5 months for the pair over the past 30 years
- However, the seasonal pattern hasn’t held in the past 5 years for AUD, with the exception of December
- September is the second-best month for gold with an average gain of 2.1% over the past 30 years
Many deep thinkers scoff at seasonals because they shouldn’t work but *newsflash* they do work.
