This rare occurrence could eclipse September’s disastrous reputation

September is historically a terrible, horrible, no good, very bad month for stocks – and Tuesday certainly lived up to its reputation.

Over the past 100 years or so, stocks have fallen an average of 1.2% in September, making it the worst month for stocks by a wide margin. The past five years have been particularly bad for trading in September. Since 2019, stocks have averaged a 4.2% monthly decline. And Tuesday was just awful. The S&P 500 fell more than 2% on one of the worst days of the year.

You have!

So…September is a wash, right? Time to sell and move back in October?

Not. Time to buck the consensus and buy stocks in September.

Why?

Because a one-time event coming up in about two weeks could make September the best — not the worst — month of the year for investors.

Take advantage of recession worries

Right now, most people are worried about a recession. These fears make sense. Unemployment rates are higher. Available positions scroll below. Consumer spending is slowing, while consumer confidence is weak. If all these trends continue, the economy could very well enter a recession.

But those trends will likely start to reverse in about two weeks – because a very specific, very powerful and very rare economic dynamic will emerge.

This strong dynamic has occurred three times in the last 30 years. Each time it has done so, it has strengthened the economy and sent stocks higher — even if they had fallen beforehand.

For example, in 1998, the economy was weakening and inventories fell throughout the late summer and into the fall. In fact, the S&P 500 fell nearly 20% that summer.

Then, in September 1998, this rare economic dynamic occurred. And from October 1998 to July 1999, the stock market increased by almost 50%!

We believe that a similar dynamic will emerge in about two weeks. When it comes out, we expect it to produce the same result it produced in 1998 – a major stock market rally.