Stocks have been sliding for months and historical patterns don't bode well. September is typically the worst month of the year for stocks. The month often starts strong — as this one did, with a Wednesday surge — then reverses course as mutual fund managers sell winners to bank quick profits, and weed out the losers in their portfolios before the final quarter of the year begins. And with the economy weakening and home sales plunging, investors already have itchy fingers poised over the sell button. Will the stock market take a dive this month? (Watch a Bloomberg discussion about the September market)
Unless economic news improves, September will be disastrous: Stocks are already "vulnerable," says Daryl Montgomery at Seeking Alpha. And if unemployment and manufacturing numbers continue to point to "a possible double-dip recession" — look out below. The Dow could be headed for a plunge that will make August's 4 percent drop — the worst for that month in nearly a decade — seem positively harmless.
"Will September be the cruelest month for stocks?"
Actually, stocks still may be your best bet: Don't pay attention to such "monumental" pessimism, says Jeff Cox at CNBC.com. "Even with September's reputation as the stock market's worst month," equities may be the best place to put your money this month. As the bond rally nears "exhaustion," there's little cash to be made there any more. So the smartest thing for "skittish" investors to do may be to buy relatively safe stocks, such as consumer staples and utilities, and bail out of riskier ones, such as financials and technology.
"Ready for September? Stocks still may be your best bet"
The bears have the momentum: Though the September curse is hardly a given, says Mark Hulbert at MarketWatch via Yahoo! Finance, this year's downward momentum will be tough for the market to shake. After a dismal August, the Dow was also down for the year to date. Over the past 110 years, that scenario has seen stocks fall an average 2.7 percent in September. Contrarian investors determined to bet on stocks rising in the coming weeks will have to ignore the lessons of history.
"Septembers by the numbers"