The Fall

Sep 11, 2020 | Phil Knight


The Fall

No I’m not talking about the imminent collapse of the stock market, but rather the change of seasons that we are about to experience.

The weeks of August were generally positive for the markets and the global economy, as indeed has been the trend for the last few months.  This after the brief, but painful decline in March, that led many of the experts and pundits to predict that we were entering the next great depression and that stock prices would remain depressed for years.

Those predictions turned out to be completely wrong, as the market rallied strongly over the following months, reclaiming almost all of its losses, with many individual stocks reaching new highs.  These same brilliant "experts" are now telling us that the market is overvalued, and that another "correction" is now pending.

Maybe just ignore these headlines and step back and look at the facts for a minute.  Yes, for sure there are a handful of stocks that have had seen great price appreciation over the last year, and are probably expensive at current prices, but if we take a look at the markets as a whole we find the following:

  • S&P year to date return: 4.15%
  • Dow Jones Index year to date return: -2.75%
  • TSX year to date return: -4.52%

Hardly the market getting ahead of itself, so maybe don't worry too much, as long as you are well diversified and have managed your  individual position risk well.

So what does September have in store for us?

Historically, the stock market has performed the poorest in September (and in election years also in October), declining somewhere in the region of -0.2% and -0.7%, but still nothing to panic about.

No one really knows the real reasons for this decline, but many attribute it to the seasonality of investors slowly returning from Summer vacations, and rebalancing portfolios that may not have been looked at in a number of weeks or months.  And of course, every four years because of the uncertainty of the pending election.

Will it be any different this time around? Historically, in an election year the S&P has closed up higher in 17 of 23 years, regardless of which party controls the White House and Congress.


So for now sit tight and let the markets do what they do, stay well diversified, don't take unnecessary portfolio risks, and let the market do what the market always does.  Just make sure you adapt with the times and don't get stuck in a rut waiting for "out of favour" stocks to become popular again, the world is constantly changing and we need to change with it.

Stay safe, stay healthy, and stay sane.


Vice-President and Portfolio Manager

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