Investors brace for another ugly Sept.

September 1, 2010 at 12:00a.m.

Associated Press

CHICAGO

The economy is weakening, home sales are plunging, and stocks are on a long slide. Now comes something even scarier for investors — the beginning of what traditionally is the worst month in the market.

Could stocks be headed for another September swoon?

“If history is any guide, for it’s never gospel, we may be in for another rough ride,” says Sam Stovall, chief investment strategist at Standard & Poor’s.

Mutual-fund managers tend to clean house after Labor Day, taking profits on winning stocks and weeding out portfolios before putting out the rosiest possible end-of-quarter reports for their clients.

Workers coming back from summer breaks also are inclined to sell stocks as they get their financial affairs in order. Any festering issues with the economy or stocks during the summer, when trading volume is light, tend to get put off until fall.

The result: September usually is a dog of a month for the market. It typically starts with solid market increases then tails off, says Jeffrey Hirsch, editor-in-chief of the Stock Trader’s Almanac.

Four times in the past decade alone, the S&P 500 shed at least 5 percent in September. The average September decline since 1950 is 0.6 percent, according to the Stock Trader’s Almanac.