What history says happens after a bad size log in September

Major U.S. September proved to be a frustrating month for the equity benchmark, marking the first defeat for Wall Street since the recovery rally began in late March.

However, history suggests that the terrible September, which is historically the worst month of the year for U.S. stocks historically, may then move October even though October is generally ranked as the second worst month of the year.

On Wednesday, the Dow Jones Industrial Average DJIA,
+ 1.19%

+ 1.19%
The S&P 500 Index SPX, with a decline of 2.3% in late September,
+ 0.82%

+ 0.82%
About 9.9% for the month and the Nasdaq Composite Index COMP,
+ 0.74%
Decreased by 5.2%.

During the European Sovereign Debt Crisis and the downgrade of America’s original Triple-A credit rating by Standard & Poor’s, any major benchmarks at the time were posted in September 2011 as ugly.

However, Dow Jones market data suggests that the traumatic losses that helped break the hard-earned monthly win streak in March, when coronavirus-infested declines reached its peak, need not translate into more carnage in October.

In fact, the index lost as much as September0% in the following month, as the S&P 500 marked a decline of at least 2% in the last 10 periods, following heavy losses until September this year. September slide of at least 3.5%, and the Nasdaq Composite fell to at least 4.5% in the ninth month of the year.

However, overall, on a percentage basis, the S&P 500 and the Dow tend to average in October. Significantly, the relatively short data set was downgraded in 2008 by a reduction in market-related penalties, while the Dow lost 14.1% in October 2008, while the S&P 500 fell nearly 17% in the month. , And the Nasdaq Composite fell nearly 18%.

The downturn during the financial crisis dragged down the overall impact of the Dow lower 2008, with an average loss of 1% in October and 0.05% for the rest of the year. Meanwhile, the S&P 500 is down 1.2% and 2.3% for the rest of the year. However, the Nasdaq Composite increased by an average of 4% during the October trading period and gained 6.6% in the year to date (see attached chart).

Dow Jones market data

To be sure, the way forward in stocks looks uncertain in 2020, even as investors and business cling to the hope of a fresh round of economic stimulus from Washington to combat the side effects of the coronavirus on business activity.

Fear that the 2020 presidential election and stock prices will surpass their earnings by rising margins has raised concerns about a potential shock to the system that could deliver a more significant gut punch on Wall Street.

But for now, investors can expect a less weak October, if not November. If not less volatile trade led by the 3rd election.