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%.
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…
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