RESOLVING THE LEDGER
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After a lackluster July, the S&P 500 is heading for a gain of nearly 3% for the month of August, and this is right ahead of a key moment: the month of September. Why is September key? Because, historically, it's known as the worst period of the year for the stock market, on average, resulting in declines over time.
The reasons behind this "September Effect" aren't particularly well understood. Some say it's due to investors locking in gains after summer vacation and even gathering up those profits to support the back-to-school period for their kids. Others suggest it may be a self-fulfilling prophesy, as investors believe stocks will fall and rush to sell.
But, it's important to remember that September isn't always a month of declines -- and even if stocks slip at this time, the following months could completely change that negative story. It's impossible to predict with 100% accuracy what's ahead, but historical trends often provide us with clues about what may have a reasonable chance of happening. And today, considering the S&P 500's August gain, history offers us a strikingly clear answer about what might be next for the index. Let's check it out.
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