September not kind to investors

Historically, this is the month that the three main averages of the stock market usually perform the poorest. It doesn’t have to happen, but my advice would be to tread carefully in September.

The “September Effect” is a market anomaly worldwide. It is unrelated to any event or news. The Dow Jones Industrial Average as well as the S&P 500 Index have averaged a decline of 0.8% and 0.5% respectively since 1950 during this month. In the period from 1928 through 2021, the benchmark S&P had an even worse record, down 1% on average.

The only reasonable explanation might be that investors tend to cash in on gains made throughout the sleepy summer, but that’s just a guess. As for the historical track record, I pay attention, although I need more reasons than seasonality to make me wary.

In any event, stocks regained quite a bit of the August 5.5% sell-off by the end of the month. I was expecting a bounce and I got it. Quarterly corporate earnings helped somewhat. On average, earnings came in better than expected.

Volume has been extremely light throughout the month since most of the financial community was on vacation. Only skeleton staff manned the trading desks and that allowed traders to push the averages higher on fewer and fewer stocks.

The economic data this week also helped support the markets. Remember that bad economic news is good for the stock market right now. The weaker the data the higher the chance that the Fed will pause or even cease raising interest rates.

The second quarter Gross Domestic Product was revised downward by 0.3% to 2.1%.

The Fed’s key inflation indicator, the Personal Consumer Expenditure Index (PCE) came in as expected with a gain of 0.2%, which was no change versus last month.

On the jobs front, both the Jobs Openings and Labor Turnover Survey (JOLTS) and ADP National Employment Report data indicated that new job creation slowed substantially last month. Both data points are considered a leading indicator of the labor market. A recent non-farm payroll revealed that the economy only added 187,000 new jobs and the unemployment rate rose to 3.8%. Bad news for labor but good news for the Fed which wanted to see employment gains slow.

On another subject, the marijuana industry had a good week. Many pot stocks saw gains of between 30-50%. Several marijuana exchange-traded funds also spiked higher. Why?

The Health and Human Services, after reviewing the present status of marijuana in the U.S. at the behest of the Biden Administration, recommended to the Drug Enforcement Agency (DEA) that the classification of marijuana be changed from a Schedule 1 controlled substance to a Schedule III drug. What’s the difference?

A Schedule I drug is considered one “with no currently accepted use and a high potential for abuse.” A Schedule III substance has “moderate to low potential for physical and psychological dependence.” If the DEA were to re-classify marijuana, it would then be considered a drug like ketamine, anabolic steroids, and testosterone, which are all Schedule III drugs. The difference in schedules could provide a large boost in sales, cash flow, and profits for American-based pot purveyors. My advice is to hold back if you have an itch to play this sector.

All the stocks are up a huge amount and will likely be subject to profit-taking shortly.

The week before Labor Day weekend is usually up. Check that one off the list. The risk going forward during the next few weeks is that we pull back to re-test the lows made on the S&P 500 Index in mid-August. From a technical point of view, that would be perfectly normal. But, if we break that level (roughly 4,432 or -5.5% from here), then we could go even lower,

How much lower? A rough guess would be down to the 4,200 level give or take. 

 

Bill Schmick is a founding partner of Onota Partners Inc. in the Berkshires. None of his commentary is or should be considered investment advice.  Email him at bill@-schmicksretiredinvestor.com.

The views expressed here are not necessarily those of The Lakeville Journal and The Journal does not support or oppose candidates for public office.

Latest News

Richard Charles Paddock

TACONIC — Richard Charles Paddock, 78, passed away Friday, Jan. 2, 2026, at Charlotte Hungerford Hospital.

He was born in Hartford on April 12, 1947 to the late Elizabeth M. Paddock (Trust) and the late Charles D. Paddock. He grew up in East Hartford but maintained a strong connection to the Taconic part of Salisbury where his paternal grandfather, Charlie Paddock, worked for Herbert and Orleana Scoville. The whole family enjoyed summers and weekends on a plot of land in Taconic gifted to Charlie by the Scovilles for his many years of service as a chauffeur.

Keep ReadingShow less
In Appreciation: 
Richard Paddock

SALISBURY — Richard Paddock, a longtime Salisbury resident whose deep curiosity and generosity of spirit helped preserve and share the town’s history, died last week. He was 78.

Paddock was widely known as a gifted storyteller and local historian, equally comfortable leading bus tours, researching railroads or patiently helping others navigate new technology. His passion for learning — and for passing that knowledge along — made him a central figure in the Salisbury Association’s Historical Society and other preservation efforts throughout the Northwest Corner.

Keep ReadingShow less
Edward Ashton Nickerson

LAKEVILLE — Edward Ashton “Nick” Nickerson died on Jan. 1, 2026, in Sharon, Connecticut. The cause of death was congestive heart failure following a heart attack. He was 100.

Nick was born July 1, 1925, in Wilmington, Delaware, the son of a DuPont Company executive, Elgin Nickerson, and his wife, Margaret Pattison Nickerson. He spent most of his boyhood in Fairfield, Connecticut, and Newburgh, New York.

Keep ReadingShow less
Steven Michael Willette

SHARON — Steven Michael “Bird” Willette, 76, of Silver Lake Shores, passed away on Dec. 25, 2025, at Vassar Brother Medical Center, with his family at his side.

Steve was born in New York City to Dorman Willette and Ann (Sabol) Willette.

Keep ReadingShow less