Some have been warning that September is usually a horrible month for the market, since September tends to deliver bad performance historically.
This year however, plunging sentiment in August could mean that September can’t get much worse, says Michael Santoli at Barron’s:
September is, back through the ages, the only month that has averaged a negative return. Septembers in midterm-election years have been even worse than average.
Here’s arguing, though, that this particular year, investors collectively have over anticipated the potential for catastrophic market damage in the next several weeks. Let’s count the ways.
First off, August was lousy, so the market has perhaps front-run the seasonal difficulties, amid pervasive gloom about the economic climate. Week before last, the poll of American Association of Individual Investors members showed the lowest percentage of bullish respondents since March 5, 2009, essentially at the moment of the 2009 low. The bullish percentage rebounded a bit this past week, but still lagged behind the number of bears.
Ned Davis Research’s “crowd sentiment poll” showed a parallel degree of pessimism, as did the Rydex/SGI Advisor Confidence Index, a measure of investment-advisor psychology that hit a 16-month low in August. Meantime, corporate insiders have all but quit selling shares of their employers.