September Weakness

If the first two days are any indicator, this September is shaping up to fall in line with the normal weakness seen for the month.  According to data compiled by the Stock Trader’s Almanac, the month of September is the weakest month of the year with an average return of -0.6% for the S&P 500.  Going back to 1950, it is the only month with more down months (33) than up months (27).  

 

However, 2009 and 2010 were both positive. Does this mean, to quote Mohamed El-Erian of PIMCO, we are seeing a  “new normal” where August is the weaker month as investors try to get in front of this historic trend?  Similar to the January Effect with small caps stocks which now starts in mid-December?  I don’t think so.  Based on the data, 45% of the years have been positive.  If you look at the historical data you see that 2 and even 3 years of back to back positive or negative returns are quite common.  

Only time will tell what 2011 will bring but history has shown that the month of September can be tough on equities.

Price of Crude and Gasoline

File this one under stuff you cannot make up.  The FTC issued a shocking report where they have realized that “crude oil prices continue to be the main driver of what Americans pay at the pump.”  Really, the price of oil is “by far and away” the biggest factor in the price of gasoline at the pump?  Who knew?  Finally, after years of research investigating this phenomenon we are told 'officially' there is a causal relationship between crude and gasoline. 

 

You can read the report here.