By: Jeff Pollock
September 1, 2017
For whatever reason it may be, September has not historically been a lucrative month for North American stock markets.
Looking back over the past 30 years, the S&P/TSX Composite Index (“TSX”) has produced a median return of -1.2% during September while the S&P 500 has dropped by a -1.0% median. In the past 3 years, the TSX was up 0.9% in 2016, down 4% in 2015, and down 4.3% in 2014. The S&P 500 was down 0.1% in 2016, down 2.6% in 2015, and down 1.6% in 2014.
In fact, both exchanges have posted a negative return during September 60% of the time since 1986. Furthermore, the distribution of returns has been negatively skewed towards large losses in September. The TSX has fallen by more than 5% in September 20% of the time (23% for the S&P 500) and gains exceeding 5% has occurred only once on the TSX (and four times for the S&P 500).
Hypothetically, if an investor had put $1,000,000 (in local currency) into the market on August 31 and then sell the entire position on September 30 for thirty years in a row since 1986, the results wouldn’t have been anything to write home about. An investment in the TSX would have lost 38% and be worth $618,000 today while the S&P 500 investment would be down 27% to be worth $727,000 now (ignoring currency).
The market has been overdue for a correction for quite some time. In the past couple weeks, our Investment Committee has raised cash to take advantage of future opportunities. While buying and selling stocks based on the calendar dates is not a strategy we employ, if history provides guidance, September could be a month for buying opportunities to emerge.
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