Par For The Course!

It's been a tough go of it for the stock market since the end of July, and I wanted to offer you some perspective.

Normally I wouldn't feel compelled to write a note about a single-digit percentage decline in the stock market, but this sell-off is so abnormally normal that I couldn't help to highlight some data that I found interesting.

The S&P 500 has declined by 7% over the past two months, bringing its year-to-date return to 11% from 20%. Some reasons for the drop include a looming government shutdown, rising interest rates, and the upcoming resumption of student loan payments.

But whatever the reasoning, this is really just par for the course when it comes to investing. Especially during the month of September.

Consider the following:

1. The stock market experiences a 5% pullback three times per year, on average. This is the second 5% pullback of 2023.

Chart — number of 5%+ pullbacks on the S&P 500 since 1930, averaging 3.4 per year — BofA US Equity & Quant Strategy, Bloomberg

2. September is the worst month of the year for stock market returns, on average.

Chart — average stock market returns by month, with September the weakest

3. The last 10-days of September is the worst 10-day stretch of stock market performance all year, on average.

Chart — the final 10 days of September are the worst 10-day stretch of the year on average

What I'm trying to get at is that the current decline in stocks is completely normal, especially with it happening during the seasonally weak month of September.

And there's also good reason to expect that the current weakness in stocks could turn into strength by the end of the year

Consider the following:

1. Fourth-quarter stock market returns have been especially strong when the S&P 500 was down in August and September (like it was this year).

Chart — fourth-quarter returns after the S&P 500 fell in both August and September

2. Pre-election years typically see a weak stock market during the summer that eventually recovers during the fourth quarter.

Chart — pre-election year seasonal pattern: summer weakness, fourth-quarter recovery

3. The past few years have exhibited a strikingly similar pattern.

Chart — recent years showing a similar summer dip and year-end recovery pattern

This is not to say that stocks are due for an immediate rebound. Nothing is guaranteed and anything can happen.

There are still (and always will be) plenty of risks abound that won't go away anytime soon.

But it is to say that this slight decline over the past two months is completely normal and par for the course in investing.

Stay the course and don’t let these short term fluctuations distract you from your long term goals.

Thank You For Reading! 🙏

If you have any questions about your investment portfolio, your current financial situation, or anything else, please reach out. Let's talk!

I am here to help. You can call me at (607)-882-1434, or e-mail mfox@ithacawealth.com.

Matthew Fox

Founder & Wealth Advisor

Matthew is a CMT® charterholder and the founder of Ithaca Wealth, an independent, fee-only fiduciary practice serving families across the Finger Lakes. He also teaches portfolio management at Ithaca College.

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