The stockmarket in September
September is the worst month of the year for shares. After the summer lull, things can get exciting again for investors: since 1982 the FTSE All-Share index has on average fallen 1% in September, the worst average return of any month in the year.
And since 2000 the average return in September has been even worse at -1.8%. The probability of a positive return in September is 47%, making it marginally better than June.
As well as poor average returns, the volatility of returns has been higher on average than any other month since 2000. Having said that, the market has actually risen in September more times than it has fallen since 2000 - it's just that when the market does fall it tends to be a significant decline.
But, however bad the month is for large caps, it is even worse for mid-cap stocks. On average the FTSE 100 index outperforms the FTSE 250 index by 0.7 percentage points - making September, along with October, the worst months for mid-cap stocks relative to large caps.
Dismal performance is not limited to the UK. The average monthly returns across 70 world equity markets are lowest in September; it is the worst month for equities in 25 countries, and only the strongest in one country - Venezuela.
In an average month for September the market tends to gently drift lower for the first three weeks before rebounding slightly in the final week - although the final trading day (FTD) of the month has historically been one of the weakest FTDs of all months in the year.
This article was written for our sister website Money Observer
A market-weighted index of the 100 biggest companies by market capitalisation listed on the London Stock Exchange. It is often referred to as “The Footsie”. The index began on 3 January 1984 with a base level of 1000; the highest value reached to date is 6950.6, on 30 December 1999. The index is “weighted” by how the movements of each of the 100 constituents affect the index, so larger companies make more of a difference to the index than smaller ones. To ensure it is a true and accurate representation of the most highly capitalised companies in the UK, just like football’s Premier League, every three months the FTSE 100 “relegates” the bottom three companies in the 100 whose market capitalisation has fallen and “promotes” to the index the three companies whose market capitalisation has grown sufficiently to warrant inclusion. Around 80% of the companies listed on the London Stock Exchange are included in the FTSE 100.
An interchangeable term for shares (UK) or stocks (US). Holders of equity shares in a company are entitled to the earnings and assets of a company after all the prior charges and demands on the company’s capital (chiefly its debts and liabilities) have been settled. To have equity in any asset is to own a piece of it, so holders of shares in a company effectively own a piece proportionate to the number of shares they hold. (See also Shares).