Have a nice week next week - or quite possibly, not
Key Points
- For reasons that cannot be fully explained, the week following the third Friday in September has historically been the worst-performing week of the year over the past 104 years
- This does not guarantee that the stock market will be down during this time (next week) in 2024
- Still, with investors' eyes currently filled with stars in light of the strong performance of late, a little historical perspective may be useful
A week to gird your loins
I have written about the "dangers" of September, and many investors know it has historically been the worst month of the year for the stock market overall. But the reality is that things can vary a lot from year to year except for next week. That week - defined as the week after the 3rd Friday in September - has been pretty awful consistently for a long time. As you may gather, no, it has not been pretty.
The week after the third Friday in September has seen the S&P 500 decline in 27 of the last 34 years. This week has been up 35 times and down 69 times since 1920. The chart below displays the percentage performance for this week every year since 1920.
The chart below displays the hypothetical growth of $1 invested in the S&P 500 Index only the week after the 3rd Friday in September since 1920.
The table below summarizes the S&P 500 performance for this week.
What the research tells us…
A 34% Win Rate over 104 years tells us that the market declines roughly twice every three years during the week in question. What will it be in 2024? We cannot predict. What the data does suggest is that short-term traders watch closely for any sign of a downside reversal as a potential opportunity to play the short side (as a very short-term trade) and that longer-term investors with cash to invest exercise a little patience in anticipation of a slightly better buying opportunity soon.