September is the reason for the weakness in the period. The market rises less often in September than in any other month. In only 30 of the last 75 Septembers has the market advanced. On average, the "500" has shed 1.3% during the month. Lest you think that poor September performance is a vestige of early 20th century market history, the average loss for the month of September since 1970 has been 1.1%.
Last year, a dismal one by almost any measure, stocks posted their biggest full month decline in September, with an 11% plunge. That was almost 40% worse than the performance of the index in July, the second-weakest month in 2002.
Why is the market so vulnerable in September? Although most of that month is technically in the summer, people tend to think of the summer season as ending on Labor Day. Investors return from their vacations in early September ready to take a fresh look at their portfolios. Many could be inclined to throw in the towel if their stocks are not producing the earnings growth they had projected at the start of the year.
Investors are aided in this exercise by securities analysts, who generally lower earnings estimates as the year progresses. By the time the third quarter is winding down, more than a few companies have taken one-time charges or otherwise tempered their views of profit growth for the year.
No wonder stocks fall in September. But equities usually rebound in the fourth quarter as investors look ahead to expected improvements in the coming year. In fact, stocks rose in 55 of the last 75 Decembers. Keep 60% of assets in stocks in anticipation of that move. Lisanti is editor of Standard & Poor's weekly investing newsletter, The Outlook