Breadth Thrusts & Bread Crusts: Worst Month Of The Year?

JC Parets
September 1, 2022

From the desk of Willie Delwiche.

The first eight months of the year have been a grind. 

A mid-month reversal in August took the S&P 500 from a 4% gain to 4% loss for the month and the early breadth and momentum thrusts now seem like a distant memory. Two-thirds of the way through the year and we are on track for the fewest days of more new highs than new lows observed in the past two decades, and 2022 is just ahead of 2020 (and lagging only 2009) in terms of daily swings of 1% or more on the S&P 500. Weakness in stocks this year has been exacerbated by weakness in bonds, as yields have climbed to new multi-year highs. The 60/40 stock/bond benchmark portfolio is down 14% through August.

Welcome to September. If you haven’t heard, it’s the worst month of the year for stocks. Since 1950, only two months (February and September) have been down on average. This is a case were we don’t really need to focus on the exact numbers – the large red bar for September says it all:

This September is already doing little to argue that its reputation is undeserved. But it’s a long month. I won’t judge September 2022 until the final bell rings.

It’s really too bad, because away from the market, I absolutely love this month.

Sure, the sun is coming up later and going down earlier than it was over the summer. In Milwaukee, we’ll lose 83 minutes of daylight over the course of the month. But the days are warm and sunny, while the cool nights are great for sleeping with the windows open.

In the garden, it’s a frenzy of ripening. The melons and squash that we’ve watched growing all summer are ready for harvest and every day brings another bowl full of tomatoes. Under protective netting (to keep away the robins), the grapes are turning a deep purple and their sugar levels are on the rise. Thinking about this year’s vintage doesn’t seem so premature now… 

School is back in session and the kids are re-engaged with activities. A daily rhythm has re-emerged following summer break, even as the calendar is now dotted with high school athletic events. 

September is also a time of celebration. Across our local extended family, we have six birthdays between late August and the end of September. This year also brings a couple of weddings.  

I know enough to know that I don’t know what will happen next in the market. Ditto for the economy. I do know that as a market observer and participant, if I get wedded to my expectations, I won’t be able to adapt to reality. 

Rather than bemoan the historical tendencies or the path that got us here, I’ll look for evidence about whether those patterns are holding or changing.

Worst month of the year? 

Not so much. 

Seems like September will offer plenty of opportunities, both in and out of the market. 

I plan to take advantage of whatever the month has to offer.

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