OBSERVATIONS MADE BY PANMURE GORDON’S PAUL MODLOCK ON MARKET ACTION IN SEPTEMBER AND POST SEPTEMBER

OBSERVATIONS MADE BY PANMURE GORDON’S PAUL MODLOCK ON MARKET ACTION IN SEPTEMBER AND POST SEPTEMBER

 

September 2015 – observations

 

The bad news

 

The first ‘low’ after a rapid sell off is rarely the last ‘low.’

 

Since 1965, the average fall in Sept has been -0.8% versus an average gain of +0.8% in other months. It has been one of the worst performing months both on an average return & win % basis.

 

In the last 10 years September has behaved much better with a 70% win rate of positive returns. But when it’s been down, it’s been down hard, averaging nearly -6%.

 

Since 1965, when the Dow has registered a year-to-date loss by August (-6.5%), September lost an average -2.7% & fell nearly 70% of the time.

 

Since 1953 when the average fall in the S&P has been greater than 5% in August (10 times), Sept has been down 70% of the time by an average 3.3%.

 

Beyond Sept

 

The good news

 

The average correction (Dow) since the war has been 13% (we got to 12%).

 

The average pull back of all the corrections (14) that we’ve seen since ‘09 is c10%. So, at least we’ve been there and done that now.

 

In all years (1928), when August has registered a -3%+ decline, the average rally in the S&P to the end of the year has been +3%.

 

Since the end of the financial crisis (’09), in the 3 years (’10,’11,’13) that August has seen declines of -3%+, the average gain in the market for the rest of the year has been +12%.

 

For markets that have sleep-walked the first half to nowhere (within a 3.5% up or down delta, which we had to end June), the average gain in the 2nd half was +6%.

 

A 10% decline in 4 trading days has only happened 8 previous times over the last 80 years (’11 ’08, ’02, ’87, ’62, ’40 & ’38). In the following 3 months the market managed to climb higher each time & often in double digits (though not without failing intervening rallies & sometimes a re-test of the lows).

 

Let’s see if the playbook works this time…

 

 

David Buik

Market Commentator

 

D +44 (0)20 7886 2775

Panmure Gordon & Co  One New Change | London | EC4M 9AF | United Kingdom www.panmure.com

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