The September Curse refers to an unfortunate period of steep declines and less lucrative margins that are usually tracked during the month. This article will discuss everything about this phenomenon, the financial theories related to it, and the effects found in the crypto market due to the curse. The article will also give insights into the next months, especially about the October Effect, which is the immediate after-effect of the September Effect.
The September Curse: Defined and Explained
The seasonal weak performance regularly reflected in the crypto market during the month of September is known as the September Effect. No valid cause has been discovered for this particular effect observed during this period; however, the market trends and growth rates found in the month can significantly affect the Efficient Market Hypothesis (EMH). There are a couple of financial theories explaining this phenomenon; however, most of them are not completely reliable and fail to prove the real cause behind the effect. It is also important to note that, during the last few years, the September Effect came with a reduced intensity, giving an optimistic note about the years to follow.
According to the historical records available to date, the phenomenon of the September Effect is evident from 1928 to 2023 in the stock market. During this period, the average values of the market efficiency saw a remarkable fall in September. However, the September Effect was not always true and happened by abiding by the calendar trend every year. Contrary to the beliefs, for some of the years between 1928 and 2023, September became one of the best-performing months of the year. For some of the years in between the period, there were worse-performing months other than September. But the term ” September Curse” got established in the financial markets because of the notable decline in averages found in many September months during the specified time period.
One of the most important features of the September Curse is that most of the financial advisors and experts are not able to predict the effect for the benefit of the investors. Even if it affects the market efficiency in a negative direction, it is not that shattering in most years; however, it is noticeable, especially for the crypto enthusiasts who are constantly in touch with market updates and trends. Apart from all these, the diminishing intensity of the trend since 2014 leaves a note of hope and positivity about the trend disappearing from the market forever.
Possible Causes Behind the September Curse: Speculations Explained
Investor behaviour is one of the most commonly believed causes of the September Curses. September, being the month opening to the last quarter of the year, a majority of the investor population would be rushing to fix their financial portfolios in both stock and cryptocurrency markets. They will be strategizing to deal with the tax losses that occurred during the past months and to gain the maximum possible lucrative margins in the last quarter of the year.
Strategies practiced by many of the mutual fund giants in the financial market can also be held as a reason for the curse effect that is found during the month of September. Stock liquidation by the investor families to meet the requirements of schooling is observed as another reason for the curse. Investors expecting the September Curse may also take precautionary measures in order to mitigate the potential losses as much as they can and thereby stay away from significant investments during this month, and also perform liquidations, which can again potentially contribute to the phenomenon. Liquidations from large-scale industrial investors can further increase the intensity of the effect, challenging the market efficiency to a higher degree.
Is the September Curse Invalid? Some Propagating Thoughts
Many of the expert financial enthusiasts and stock market professionals are of the opinion that there is no such phenomenon as the September Effect. According to them, the chances for such a declining trend to persist for almost a century are nearly zero. The experts in the industry and the giant ecosystem would have already taken effective measures by now if the effect had been interfering with the market efficiency negatively for such a prolonged period of time.
Some also opine that the September Curse is certainly a thing of the past, and has not made its appearance, especially after the 1990s, and even if declining performances have happened after that, they are not too large to be considered a part of the curse. Some regard August as the worst-performing month, making its effects noticeable in the month of September, during which, actually, a healing is the main market scene and not a weak performance. Hence, the experts advise investors to consider the September Curse as just a historical event, still manipulated and propagated as an active phenomenon to benefit certain institutional interests.
The Coalition Between the September Curse and the October Effect
Whenever there is a discussion regarding the September Curse, the October Effect is also discussed with equal importance. However, unlike the September Curse, there are a couple of historical events that are linked to the October Effect. But these historical events are limited only to a few years for the time period mentioned, which might have potentially affected the October of that particular year and some of the years that followed, and not beyond that. Some of the historical events that can be regarded as the reason for the October effect are the panic of 1907, Black Tuesday, Thursday, and Monday of 1929, Black Monday of 1987, the DJIA dips of 2001, 9/11, the subprime crisis of 2000, and a few more.
Final Thoughts on the September Curse
The September Curse is an anomalous effect usually observed during the month of September every year since 1928. However, this decline in averages during the specific month follows a diminishing trend over the past years. Apart from that, a lot of economic experts are of the opinion that such a trend does not exist and is just a thing of the past. A coalition between the months of September and October has also been found, suggesting a transfer of patterns between the consecutive months. However, the bottom line is not to stress over this supposed phenomenon because no valid causes have been found yet to back up these assumptions.