The stockmarket in September: bursting back to life

The stockmarket tends to burst back into life in September. Unfortunately, the renewed activity in shares tends to be on the downside.

Since 1982 the FTSE All-Share index has an average return of -1.1% in this month, the worst for any month. Since 2000 the average return in the month has deteriorated to -1.9%.

However, although the average return is bad in the month, about half of all Septembers actually have positive returns.

The problem is that when the market does fall, the falls can be very large. For example, the All-Share has declined over 8% in three Septembers since 2000.

Bad month for mid-cap stocks

The situation is even worse for mid-cap stocks. On average the FTSE 100 index outperforms the FTSE 250 by 0.7 percentage points in September - making September, along with October, the worst months for mid-cap stocks relative to large caps.

Although October has a reputation for being a volatile month for shares (due to some very large market falls in the month, for example in 1987), since 2000 the most volatile month for stocks by a significant margin has been September.

In 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 of the month has historically been one of the weakest of all months in the year.

Finally, for investors who adhere to the adage "sell in May, go away and don't come back til St Leger's day", 10 September sees the St Ledger Stakes horse race at Doncaster.

This article was originally published by our sister magazine Money Observer here

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.