September 2014 Portfolio Outlook: Should We Fear a September Swoon?

Bears often come out of the woodwork this time of year and note that September is the worth-performing month on average—the only month with a median monthly loss going back to 1950. September is also the only month in which there were more negative years than positive; 53% of Septembers since 1950 have been negative while only 47% have been positive.

Of course, small losses aren’t scary; it’s the “big ones” that keep investors awake at night. And on that count, September had the third-worst single month of the entire period, with a loss of 11.39% in 2002 and losses of more than 9% in 1974 and 2008.

October takes the cake for bad months—the October 1987 Crash chopped 21.76% off the value of the S&P 500.  And of course, the Great Crash of 1929 also took place in October.

So…what conclusions can we draw from this?

I’ll start by saying that, while statistically significant based on sample size, the averages for September and October are exactly that: averages.  Using the past as a guide, we’re slightly more likely to see losses in September…but only slightly.  All else equal, the risk is not big enough to justify making major portfolio moves, particularly if your investment time horizon is longer-term and if by trading you would generate taxable gains.

In the year to August 31, Sizemore Capital’s Dividend Growth model has had a solid year with year to date total returns of 17.8% after management fees.  The S&P 500 had total returns of 9.9% over the same time period. [Note: all performance data reported by Covestor; past performance is no guarantee of future results.]

Following a major portfolio overhaul in April and May, I have made no major portfolio changes this summer.  The portfolio’s REITs have been particularly strong contributors to returns in 2014, as have its master limited partnerships.

My Tactical ETF and Global Macro models underperformed in August and are now slightly trailing the S&P 500 with year-to-date returns of 8.1% and 8.7%, respectively, after fees. [Note: all performance data reported by Covestor; past performance is no guarantee of future results.]

Our exposure to battered emerging markets and Europe—which was a source of outperformance for much of 2014—has become a source of underperformance as these sectors have corrected.  I continue to see far better values outside of the U.S. market, and I expect to see emerging markets assume market leadership in the remainder of 2014.

Charles Lewis Sizemore, CFA, is the editor of Macro Trend Investor and chief investment officer of the investment firm Sizemore Capital Management. Click here to receive his FREE weekly e-letter covering top market insights, trends, and the best stocks and ETFs to profit from today’s best global value plays. 

This article first appeared on Sizemore Insights as September 2014 Portfolio Outlook: Should We Fear a September Swoon?



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