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BLOG: The September curse – a warning for investors

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Every year at this time, investors start to worry. Back from holiday and with the nights drawing in, a bit of gloom is understandable.
BLOG: The September curse – a warning for investors

But there are good statistical reasons to fear the markets in September and October and, this year in particular, there is plenty to fret about.

Some of the biggest market crashes have occurred at this time of year, notably the mega meltdowns in 1929 and 1987. And banking crises tend to cluster in the autumn as well. Both Northern Rock and Lehman Brothers chose September to implode. The long-term averages also point to September being the worst month of all for investors.

This September looks no different. First, emerging markets are in their worst funk since the late 1990s. Currencies and stock markets have slumped on the back of slowing growth, fears about US monetary policy and a realisation that many developing countries didn’t get their economies in shape in the good years while there was plenty of easy money sloshing around.

Second, in two weeks’ time we will learn whether the Federal Reserve is going to follow up on May’s threat to “taper” its emergency levels of monetary stimulus. When Ben Bernanke first hinted at slowing his $85bn a month money printing, markets took it badly.

Even when September is out of the way, there is a nasty looking monster lurking under the bed in the form of the US debt ceiling. Last time around, in 2011, American politicians’ inability to have a grown-up conversation about the debt limit triggered the first downgrade of US Treasuries in history.

On top of all of this, Syria hangs like the sword of Damocles. Military action has been postponed but certainly not cancelled and markets hate the threat of war even more than the reality of conflict.

So, we’re holding our collective breath a bit as we move into these traditionally difficult months. That’s understandable but actually not much help if we are managing our savings and investments and wondering what to do now.

The reality is that this September does not look that much different from many Septembers in years gone by. Twenty years ago, in the later stages of the early 1990s recession, or ten years ago, at the bottom of the post bear market; the outlook didn’t look very clever either. But with the benefit of hindsight, it is clear that the only sensible course of action then was to grit your teeth, keep saving and stay invested.

Ben Bernanke is considering reducing stimulus because the US economy is finally recovering. Syria is undergoing a terrible civil war and is contributing to worrying regional instability but its impact on the global economy is trivial. And America, despite examining all the alternatives, does tend to eventually muddle through and do the right thing fiscally.

In part because there is so much to worry about, stock markets are not expensive by historical comparisons. Certainly shares are priced at levels which have, in the past, made sense for medium to long-term investors.

As ever, there are things you can do to prepare for any unexpected autumn gyrations – mainly ensuring that your savings are well-diversified. Once you have done that, however, my suggestion this September is to spend a little less time watching the news and a little more enjoying the misty mornings and the last burst of summer sun.

Tom Stevenson is investment director at Fidelity Worldwide Investment

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