What Come After SeptemBEAR, Q4?

Well, September has lived up to it’s expectation and markets have ended in red by ~5%. Not an unusual phenomena historically, as the month of September is usually known to be “BAD RED” for the markets. In last 71 years S&P 500 has closed in red for 40 Septembers.

Falling markets usually panic investors and every bear that wakes up from hibernation had dooms day theories & predictions. There is more noise than it pleases the charts and less conviction to hold on to your existing positions or add new value buys.

Upon digging into the data from the year 2000 onwards, I have found an interesting pattern. There have been a total of 10 Septembers with negative closing, and on each occasion but one, the smart money has kicked-in during the subsequent quarters and the markets have recovered to close in green. This one exception is the year 2008 (the year of Lehman collapse). Even Q4 ’20 has given a positive return with a negative September close.

Below graph shows the drop in % term on each of these 10 occasions and the recovery in these subsequent quarters thereafter.

This does not necessarily mean that one gets onto a LONG position in every stock that has fallen, rather such occasions present opportunities to re-organize, add and average to your existing portfolio with value buys by bottom fishing. Ideal strategy is look for blue chips that have gotten cheaper and other stocks that sustained the September fall and outperformed broader market Indices in their respective sectors. A lot of them will get cheaper.

Avoid Noise. Study Data.