This month could be particulary harsh for Wall Street.

September 1, 2009 – 12:35 pm – No Comment

As MSNBC noted, if you go by historical figures, September is typically the worst month for stocks. While most people would think October would be the worst month for stocks (think Black Monday and Black Tuesday), September is often the worst month for Wall Street aside from huge crashes. Even last year, the Dow Jones shed 6%.

The S&P 500 has posted a decline of 1.3% on average every September since 1929.

So, why is September such a bad month for the stock market?

Sam Stovall, chief investment strategist at Standard & Poors thinks that because people want to spend more time on their portfolios after coming home from vacations could be partially to blame for the fall in the September market.

Of course, toward the end of the year people are starting to run out of the money they had at the beginning half of the year due to tax refunds and bonuses.

Then there is the idea that mutual funds will sell off the funds that don’t perform well before the end of the fiscal year in October.

“Psychologically, when the leaves turn in the fall, vacations end and the days are getting shorter, there is this kind of negative vibe out there that tends to accentuate any negative events,” said Dan Seiver, a finance professor at San Diego State University.

One factor that could contribute to a September downturn is the realization by investors that they’ve been a little too zealous, driving the market up 29 percent since March, and switch to sell mode. Anderson believes a small correction could be coming, but there is so much money on the sidelines right now that as soon as the market begins to head south those poised to jump could get in quickly, softening the downward impact.

Source