INVESTING - Glad that August is over? Not so fast - Historically the worst month for stocks, September brings a new set of worries this year.
Even in the best of times, Wall Street has come to fear September and October.
Now, with financial markets worldwide on edge after a summer of turmoil, investors have good reason to be even more apprehensive than usual about what the next two months will bring.
Historically, September has been the U.S. stock market's worst month of the year in terms of the average performance of major indexes.
"September has been a perennial problem," said Sam Stovall, chief investment strategist at Standard & Poor's in New York.
The S&P 500 index of big-name stocks has fallen in half of all Septembers since 1990, he said.
October, meanwhile, has hosted some of the worst market crashes -- in 1929 and 1987, most notably. More recently, October 2002 saw stocks slide in the final burst of selling of the 2000-02 bear market.
As Wall Street gets back to work today, investors will have to contend with more than the usual seasonal uncertainties about the direction of stock prices.
The central concern is that the housing sector's woes have spread far beyond that industry and could pull down the broader economy, taking corporate earnings with it.
Bill Fleckenstein, a Seattle-based money manager who for a long time has predicted a day of reckoning stemming from the debt buildup in the domestic economy, contends that we're on the cusp of "the most brutal consumer-led recession in 50 years."
His is a minority view. But the summer's global credit crunch was such a shock that it caused many market pros to rethink their worst-case scenarios.
Investors began to dump mortgage-backed bonds in the spring as home loan defaults soared. In August, the fear grew that other types of borrowers that loaded up on debt in the easy-money era of recent years also could have trouble repaying what they owe -- for example, companies that issued large amounts of high-risk junk bonds.
As investors and banks worldwide pulled back from extending credit in August, a financial panic ensued. Stock markets suffered collateral damage. U.S. share indexes fell the most in more than four years before rebounding somewhat.
Stock investors' moods have improved in the last two weeks, bolstered in part by the Federal Reserve's efforts to pump money into the banking system and by the growing belief that the Fed will begin trimming its key short-term interest rate, now 5.25%.
