Experts are split on whether stocks will beat the ‘September Effect’ – Ed Yardeni warns of pain while Bank of America sees room for gains

(Photo by Drew Angerer/Getty Images)

September is historically considered the worst month of the year for stocks, in what is known as the “September Effect.”

But this year, market experts appear divided over whether US equities will repeat the pattern or defy it.

Here’s where 5 top voices see stocks heading in September and ahead.

September has historically been a weak month for stocks, although there’s no real explanation for the pattern beyond statistical seasonality. The phenomenon even has a nickname: “The September Effect.”

Since 1945, the S&P 500 has dropped 0.7% on average during the ninth month of the year, data from CFRA Research shows, with little consensus on why. So far this month, the benchmark index has fallen more than 1%.

Market experts remain split on whether US equities will repeat the pattern. Some, including economist Ed Yardeni are gearing up for poor results, while others think the market will be able to buck the trend this time.

Here’s where stocks are headed in September and ahead, according to 5 top voices.

Ed Yardeni, president of Yardeni Research

“On Sunday, we observed that September is a good month for picking apples. It is widely viewed as a rotten month for stocks, which has been true for 55% of Septembers since 1928,” Yardeni said in a note to clients.

But despite September being an unfortunate month for stocks, it’s also a good opportunity to invest in cheap equities before a typical “year-end Santa Claus rally”, according to him.

Among things that could go wrong for investors this month, Yardeni highlighted rising oil prices, inflation risks, and China’s faltering economy.

Tom Lee, head of research at Fundstrat

On a more optimistic note, Fundstrat’s Tom Lee noted three reasons why the stock market could hold up in the historically weak month of September.

The first is down to his analysis of seasonal trends. According to Lee, since 1950 there have been eight months when stocks were up more than 10% in through August but down in the first three days of September. In five of those eight months, stocks finished higher for the rest of…


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