As promised, I am writing to discuss a little bit about the significance of post Labor Day for the financial markets. This year, we find ourselves at the resting point of a large rally after the July lows. August saw a lot of churn, but the major indices went almost nowhere in total. Now, everyone is looking to trading beginning tomorrow with trepidation or anticipation (depending upon the bull/bear outlook). Typically, this period marks a turning point for those who have hopes for a robust spending environment (for example, consumer holiday spending and end-of-year corporate largesse) and for those who believe the optimists will be proven wrong. It is hard for me to gauge right now whether the optimists have finally let go of their robust 2nd half recovery scenarios, but to the extent the recent rally marks continued belief in that scenario, we will see a big sell-off. What is certain is that stocks in general are far over-valued for "realistic" economic prospects (there are notable exceptions!). So, I continue to lean towards the Fall sell-off prediction - my only question is whether we simply retest the July lows or crash right through them.

Anyway, I decided to look at the actual record to determine why so many consider this period so important. I focused on the S&P 500. The record is mixed, but it is notable that the bear market has made us fear Sept while the preceding bull market was (post 87 crash) mixed but mainly positive! Note how the trading day following Labor Day tends to be relatively flat.

I will let you decide for yourself....

(DALD: stands for "day after Labor Day". Also note that when I report end

of Sept performance I am measuring from the day before Labor Day)

2001

DALD pretty flat. Market followed by continuing August's sell-off. 9/11 accelerated the sell-off that was already underway.

2000

Day BEFORE Labor Day was the ominous peak of the post-March, 2000 crash. Everyone was very excited and assumed we were continuing to recover. Instead, DALD was flat, Sept ended down 6% and October continued the sell-off....

1999

August had a mild recovery rally. DALD pretty flat. September went down -5.5% and took away al of August's gains.

1998

DALD had a 5% rally, but the end of Sept brought the S&P right back to the end of that rally. October removed the rest of Sept's gains.

1997

DALD had a 3% rally. Sept ended happily 5.5% up.

1996

DALD was pretty flat. Sept ended happily with a 6.1% rally. October continued the party.

1995

DALD was pretty tame. Sept ended happily with a 3.5% gain. October was relatively mild.

1994

DALD tame. Sept ended down a mild 2.1%. October returned the losses.

1993

DALD tame. Sept also ended even. Oct featured a mild rally.

1992

DALD tame. Sept ended even. October sold off but then recovered.

1991

DALD down -1%. Sept ended down -2%.

1990

DALD pretty tame. But September ended up decidedly down -7.7%

(anticipation of war with Iraq no doubt)

1989

DALD tame. Sept ended even.

1988

The day BEFORE Labor Day had a 2.7% rally. DALD was flat. Sept ended up 2.6%.

Hope this helps!