September has historically been the least volatile month of the year, but volatility this September is the lowest it’s ever been, says LPL Financial’s Ryan Detrick.
“So far this year, 40 basis points is the average intraday move that we’ve seen so far on the S&P 500 this September, which is the least volatile ever,” the senior market strategist said Thursday on CNBC’s “Futures Now.”
In other words, this September the S&P 500‘s average daily range has been around 0.5 percent.
So what does this mean for the market going into the fourth quarter? Detrick points to the fact that October has historically been the most volatile month of the year, with more 1 percent moves than any other month, so investors can expect a likely spike in volatility.
“Could volatility mean a little bit of a pullback?” he said. “Potentially, or maybe just some 1 percent daily changes which again, historically are normal, but clearly we haven’t been seeing too many of them so far in 2017.”
However, while the market has been trading in a range this month, Detrick says that he does see stocks going higher in the fourth quarter. The key here is that while the S&P 500 hasn’t seen too many moves beyond that 0.5 percent range, the fact that it has both hit a record high this month while being up 10 percent year to date is historically favorable for stocks.
“That’s only happened 12 times since 1950, and sure enough the fourth quarter is up almost 6 percent on average 92 percent of the time, which is 11 out of those 12 times,” said Detrick. “The fourth quarter is usually strong, what I’m getting at is it’s even stronger when you have pretty good strength in September and throughout the year leading up to it.”
This means that according to Detrick’s data, the S&P 500 could actually rally another 6 percent before the end of the year.
As of Friday morning, the S&P and Nasdaq opened higher though the Dow was down from the previous day. If all three major indexes close higher on Friday, then stocks would have their first positive September since 2013.
Source: Investment Cnbc
This is the least volatile September ever, here’s what that means for stocks