September pattern may not hold

NEW YORK – Wall Street professionals know to keep their expectations in check in September, historically the worst month of the year for stocks. As summertime draws to a close, money managers are getting back to business, cleaning house, and often sending the market lower in the process.

September has opened strong eight of the last nine years, but it’s ended with a knockout punch for stocks for the last five, partly because institutional traders are making end-of-the quarter portfolio changes. But some analysts, noting the market’s unusual sell-off this July, question whether the pattern will hold true this year.

“The normal election year pattern shows the market rallying in July and most of August, then selling off, so we’ve been much weaker than normal,” said Tim Hayes, global stock strategist at Ned Davis Research in Venice, Fla. “The market may have already had that pre-election sell-off.”

During seven of the last 10 presidential races, the major indexes posted gains for September, according to the Stock Trader’s Almanac. The month ended in a loss three times – in 1972 and 1984, when incumbents ran and won, and in 2000, when there was no incumbent. Part of what drives September’s typical weakness is the difficulty of assessing the outlook for third-quarter earnings following the summer doldrums.