September and October Market Performance: A Historical Look at Volatility
Financial markets in the U.S. have historically shown a tendency for weaker performance between May and October, a period often summarized by the adage "Sell in May and go away." This timeframe includes the traditionally "dry" summer months and the fall months of September and October, which have historically yielded negative average returns over decades, contrasting with the generally positive annual returns investors have come to expect. However, the article cautions that past statistics are not future predictions, and acting solely on this trend could lead to regret, citing recent years where this period has seen positive average returns.
September, in particular, has been marked by significant global financial and geopolitical events. Historically, this month has seen crises such as the 1997 Asian Financial Crisis, Russia's 1998 debt default and the subsequent near-collapse of the Long-Term Capital Management (LTCM) hedge fund, the devastating 9/11 terrorist attacks in 2001 which led to stock market closures and sharp declines, and the 2008 global financial crisis triggered by the collapse of Lehman Brothers.
October also has a history of dramatic market events. The 1929 stock market crash, which saw the Dow Jones Industrial Average plummet by 25% over two days and eventually led to the Great Depression, and the 1987 "Black Monday" crash where the Dow fell approximately 22% in a single day without a clear immediate cause, are notable examples. The 2008 financial crisis, while beginning in September, intensified in October with significant market drops and widespread panic, leading to a prolonged downturn and severe economic consequences.
Israel's stock market, while influenced by global trends, has its own particularly dramatic history with October. The Yom Kippur War began in October 1973, significantly impacting the economy and stock exchange. October 1983 saw the banking stock crisis and the closure of the Tel Aviv Stock Exchange for regulatory intervention. Most recently, October 2023 marked the beginning of the war following the Hamas attacks on October 7th, which initially caused a sharp market decline but was followed by a remarkable recovery starting in early 2024.
Examining Israeli market data since 1992, the Tel Aviv Stock Exchange (TASE) shows a significantly stronger average return from November to April (8.4% for the TA-25 index) compared to the May to October period (0.7%). The article notes that September has not yet lived up to its "black September" reputation this year, with a modest rise, but October looms as a potentially challenging month. The author identifies rising yields on government bonds in developed countries, including the U.S., as a primary threat to stock markets, creating an attractive alternative investment that could diminish the appeal of equities.