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The September Effect

The September Effect

September 08, 2021

Insight On 2021 Returns So Far And a Financial Look Forward

The stock market notched 7th straight months of gains in August, and the Standard & Poor's 500 index has set 53 new highs so far in 2021.

But it's a new month, and you should expect to see an article or two about what's called the "September Effect." September is when many professional investors end their fiscal year, which can lead to some overall market weakness.Some refer to historically weak stock market returns for the month of September. However, the effect is not overwhelming and, more importantly, is a poor predictor of year-over-year September performance. For example, if an individual had bet against September over the last 100 years, they would have made an overall profit. However, if the investor had made that bet only in 2014, for instance, they would have lost.2

Instead of looking at a singular months' performance, we have compiled a number of reasons to look forward to potential market growth and a couple of items to be cautious of.  

Reasons to be optimistic about the market:

  • Industries Reopening: As the world continues to reopen, the economy will tend to react favorably. We will see certain businesses gain value in their stocks again (think oil, travel and entertainment).
  • Growth in New Industries: Specific industries—tech, e-commerce and biotech—gained tons of ground during the pandemic and will continue to grow and give investors reason to feel confident.3
  • Low Interest Rates: The Federal Reserve has promised to keep interest rates near zero until at least 2023 which will encourage spending.4

What we're keeping our eye on:

  • Inflation: Those stimulus checks come at a cost. With more government spending, we’ve seen an increase in inflation which has lead to some investors pulling back and being cautious.
  • Unemployment: Although we’ve recovered millions of jobs since the country was hit hard in 2020, we’re still experiencing high unemployment numbers.5 With many federal unemployment benefits ending on September 4th, we can expect to see more people returning to work.6

We can run numbers and make predictions all day long, but at the end of the day, the best we can do is continue to watch the market and do what's best for our clients. So let’s be the kind of people who are prepared for anything the future has in store.

Word From Steve


When I see articles about the September Effect, I'm reminded of my favorite stock market quote by Mark Twain.

"October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.”

There's always going to be some market theory, opinion, or model that suggests we're in "this cycle" or "that trend." Over the years, I've found that the best strategy is to ignore the noise and focus on your investing goals.

If someone you know needs help with their finances, refer them to us. We will be glad to help.

1., September 1, 2021. The S&P 500 Composite Index is an unmanaged group of securities considered to be representative of the stock market in general. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
2., May 17, 2020

3. CBS, 2021
4. AP News, 2021

5., 2021

6. The Detroit Free Press, Aug, 2021

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.