To The Moon

As September unfolds, many investors are wary of its historical reputation as one of the worst months for the stock market. While some advocate a cautious "do nothing" approach during this month, it's essential to consider both historical data and the current economic landscape when making investment decisions.

Is it really the best to do nothing knowing it is potentially the worst month?

Historical Data

Let’s first look at why September is called the worst month.

Historical Monthly Returns

Historically, it's generally observed that bull markets tend to last longer than bear markets, so the average monthly percentage change in stock markets is typically positive. However, there are exceptions to this positive trend, with February, May, and September standing out as months historically associated with negative returns. Among these, September is particularly notable as it often exhibits the poorest performance, with an average monthly decline of approximately -1.1 percent. This historical pattern has led some investors to exercise caution during the month of September due to its historical reputation as a challenging period for stock markets.

Economic Updates

It's important to note that past performance doesn't guarantee future results. Investors should not rely solely on historical trends to guide their actions, so let’s look at the current economic updates.

The upcoming release of the Summary of Economic Projections (SEP) and the "Dot Plot" from the Federal Open Market Committee (FOMC) meeting is generating significant anticipation in financial markets. Expectations point to the likelihood of the FOMC maintaining the current federal funds rate (FFR) and not implementing another rate hike in the near term, based on the FFR estimate increase from 5.1% to 5.6% projected at the June meeting. This implies a potential "one-and-done" approach for rate hikes in 2023.

Additionally, market watchers are looking for potential adjustments in the FFR forecast for the next year, which previously showed a substantial drop to 4.6%, with expectations of it moving closer to 5.6%. Such a shift would align with the Fed's commitment to a "higher-for-longer" interest rate stance and might signal that the Fed is not rushing to lower interest rates, potentially influencing the need for additional rate hikes. Inflation projections, particularly for headline and core Personal Consumption Expenditures (PCED) inflation, are also closely monitored, with August rates at 3.3% and 4.2%. Expectations are that the estimates for these rates may not change significantly in the upcoming September release, highlighting the Fed's stance on managing inflation.

It's crucial to understand that unmet market expectations can create uncertainty and potentially lead to market volatility. Therefore, it's essential to closely monitor the release of economic projections to discern its potential implications for monetary policy.

What to do now?

Now to answer the most important question.

For short-term traders, reducing risk by limiting trades or adjusting strategies may be prudent during this potentially volatile period.

For example, put sellers can reduce the risks by reducing the number of trades or switching to selling calls during this month. For myself, I currently only have 2 open short put trades, which I shared in my previous post - Earn Profits with Proven Low Risk Sell Put Strategy.

Long-term investors, on the other hand, may consider staying the course, taking advantage of market downturns to add to existing positions or initiate new ones. It's crucial to have a clear investment plan and risk tolerance that align with your financial goals.

Building up my position in AMZN

As an investor, I continue to DCA into mega-cap companies that I believe in such as $Alphabet(GOOG)$, $Amazon.com(AMZN)$, $Microsoft(MSFT)$ and $Tesla Motors(TSLA)$. I stand steadfast in my commitment to building a future fueled by conviction, not distraction. In the face of skepticism that large-cap giants are overvalued or that Tesla being too volatile, I choose to silence the noise and follow the unwavering beat of my investment plan.

I understand the value of time, and as a young investor, I embrace risk as the currency of opportunity. I recognize that in every challenge lies the potential for growth, and in every setback, a chance for a comeback. I am resolute in my belief that these investments are building blocks for my future. For it is not the chorus of doubt that defines my journey, but the steadfastness of my purpose. I am an investor with a vision, unwavering in the pursuit of my financial dreams. I know that in investing, fortune favors the bold, and I stand boldly on the precipice of possibility. How about you? [Doubt]

One day you open your eyes and realise you’re 69, while still thinking 25 felt like yesterday. Would you regret what you’re doing now? -TigerOptions, September 2023 [Thinking]

Technical Analysis

$SPDR S&P 500 ETF Trust(SPY)$

SPY Daily Chart

From a technical analysis standpoint, keeping an eye on the next support level, 440-442 range, for the S&P 500 ETF, can provide guidance for potential entry points, but it should be combined with a broader investment strategy. If we don’t see a rebound at 440-442, there might be a potential retest of the August low.

Conclusion

In conclusion, while September's historical performance may raise concerns, investors should approach it with a balanced perspective, considering both historical data and current economic conditions. Having a clear investment plan, risk management strategy, and a long-term outlook can help steer the uncertainties that any month may bring for investing. [Victory]

Read also:

The Vision of a Long-Term Investor

Disclaimer: The information provided in this post is for informational purposes only and should not be considered as financial advice. This post reflects my personal opinions and should not be considered as financial advice. Investment is subject to significant risk, including the potential loss of capital. Always conduct thorough research before making any investment decisions. [Observation] 

Do you agree with my views? Feel free to voice out your opinion and criticism in the comments below.