5 market sectors and 9 stocks to keep on your radar in September

By Mark Hulbert

September is the market's cruelest month - except in presidential election years

Shift your portfolio towards those industries and sectors that have made money in September.

There are two reasons why traders might want to resist the urge to go to cash in September, despite the month's reputation as terrible for the U.S. stock market.

The first is that this reputation derives from Septembers of the first three years of the U.S. presidential term. During election years, the U.S. stock market in September performs no worse than average. The other reason not to go to cash: Some industries and sectors counter the overall market's September slide.

September's reputation as a losing period for stock investors is well deserved - if we focus on the average of all years. Since the Dow Jones Industrial Average DJIA was created in 1896, it has gained an average of 0.8% in all non-September months. In the average September, in contrast, the Dow has lost 1.1%. That spread of 1.9 percentage points is hugely significant from a statistical perspective.

Presidential pardon

Less widely known is that Septembers in presidential-election years aren't so bad for the stock market. In the 32 such years since the late 1800s, the Dow in September produced a gain of 0.2%, on average. That is better than the average gain of four other months during presidential-election years, as you can see from the chart below. During presidential-election years, in fact, the Dow's average return in September is statistically indistinguishable from the average of the other 11 months.

That alone may be reason enough for you to remain in the stock market over the next month. But if September's terrible reputation still worries you, another option would be to shift your portfolio toward those industries and sectors that have made money in the average September, even as the overall market has suffered.

To identify which sectors have the best average September return, I turned to a database containing the monthly returns of 48 industry sectors since 1963, according to data provided by Dartmouth College professor Ken French. The top five, in descending order of their average September returns, are listed below. Notice that all five's averages are substantially above the Dow's average September return of minus-1.1%.

Average September gain:

Gold and precious metals: 1.4%Insurance: 0.7%Personal Services: 0.6%Oil: 0.5%Healthcare: 0.5%

Standout stocks

The nine stocks listed below - including Exxon Mobil (XOM) and Allstate (ALL) - are from one of those industries currently recommended by any of the investment newsletters monitored by my performance-auditing firm. As additional protection against a big market downdraft in September, I further narrowed the list to include only those whose betas are below 1, have forward price/earnings ratios and price/book ratios below those of the S&P 500 SPX, and have a dividend yield that is currently higher than the market's. The companies that survived this winnowing process are all from either the oil or the insurance business and are listed in alphabetical order:

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com

More: Presidential election year and fall seasonal trading patterns favor the bulls

Also read: Here's how low mortgage rates have to go to restore the frozen U.S. housing market.

-Mark Hulbert

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09-03-24 0606ET

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