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September is historically the worst month for the stock market, and this year proved no different

October 10, 2023

The Dow was down 3.5% in September, and the Nasdaq was down 5.8%. Those were the worst monthly performance since December. 

There were plenty of reasons for stocks to fall. Inflation remained a top concern for investors and consumers, with oil prices rising and getting close to $100 a barrel. 

That plays into an equally important point. While investors had hoped that gains in the fight against rising prices might allow the Federal Reserve to stop raising interest rates or even cut them next year, Chairman Jerome Powell made it clear that the central bank was going to keep them higher for longer.

Investors have also been concerned with the government shutdown, which causes an automatic slowdown to the economy as people stop getting paid and services halt. Don’t think it is going to happen, and if it does, it will be short-lived. This is not a reason to panic or think it will have a significant impact on the markets. 


Some investors think of October as a tough stretch—no surprise given that 1987’s Black Monday, the 1929 crash, and the bank panic of 1907 all happened during the month—but historically, it has been better than September. Since the indexes’ inceptions, the Dow Jones Industrial Average has increased an average of 0.5% in October, while the S&P 500 and the Nasdaq Composite have respective average gains of 0.6% and 0.8%.

“I see a lot of signs of excessive negativity,” Eric Diton, president and managing director of The Wealth Alliance, said. “One thing October has done a whole bunch of times is make a historic bottom in the month. A lot of major bottoms occurred in that month. And I actually think the fourth quarter is going to be positive, and I think that October is going to be positive.” I agree with Diton’s summary, and as a result, I am beginning my move to growth this week. I will continue with this move by the end of October. 

What follows are the 5 trends to look at going forward.

1.     A rolling recession may have already begun. A rolling recession occurs when industries rise and fall at different times, creating pain in certain sectors while others flourish. Investment managers take advantage of the flourishing industries and move out of the depressed industries

2.     Resilient consumers could lead a strong economic recovery. The good news is that there are several reasons an eventual recovery could be relatively strong. For one, the U.S. consumer appears to be in relatively good shape. Household debt was only 9.8% of disposable income as of June 30, 2023 – much lower than during the global financial crisis and other typical recessions. Supported by a strong labor market, resilient consumer spending could boost a range of industries, including travel and leisure. Secondly, many U.S. companies have cleaned up their inventories and balance sheets. 

3.   A mountain of cash could be a bullish sign for investors. One of the most notable trends this year has been investors’ flight to cash and cash equivalents. Money market fund assets ballooned to a record $5.6 trillion as of September 27, according to the Investment Company Institute. In the past, levels of cash tend to peak around market troughs and shortly before market recoveries. Investors who stay on the sidelines have missed market recoveries, potentially impact their ability to achieve long-term goals.

4.   There have been windows of opportunity between a Fed pause and cut. While many investors may be planning to remain on the sidelines until the Fed starts cutting rates, and that could be a mistake. That is because there have been windows of opportunity between the Fed’s last rate hike and the first cut. Cash has the lowest returns during such periods.

5.   Bull markets have dominated bear markets. Bulls defeat Bears, 67 to 12. That might seem like a lopsided score in a sporting event, but it highlights the importance of this fundamental truth about the markets. Since 1950, the average bear market has lasted 12 months while the average bull market is 5 times that. The difference in returns has been dramatic. Even though the average bull market has had a 265% gain (versus a 33% decline for the average bear market) recoveries are rarely a smooth ride. Investors often face unsettling headlines, significant market volatility and additional equity declines. But those able to move past the noise, take a long view and stay invested through market cycles stand a better chance of scoring long-term gains.


Bottom line, we are beginning our move back to growth and large-cap stocks. We have begun by moving out of international and will, over the next 30 days, be moving out of dividend stocks and, eventually, the small stocks. Please keep an eye out for our communication and mutual fund moves and annuity moves, as we will need you to call the office to confirm them. For the first time in over nine months, I am confident that the tide is turning and that we can continue to grow your accounts. I am sure many of you are ready for this move. I look forward to more confirmation of this move in the weeks ahead.  

"This material is provided for general information and is subject to change without notice.  Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. The information does not represent, warrant or imply that services, strategies or methods of analysis offered can or will predict future results, identify market tops or bottoms or insulate investors from losses. Past performance is not a guarantee of future results.  Investors should always consult their financial advisor before acting on any information contained in this newsletter.  The information provided is for illustrative purposes only.  The opinions expressed are those of the author(s) and not necessarily those of Geneos Wealth Management, Inc."