What’s the worst month of the year for investors?
September has earned a reputation as a challenging month for investors. Understanding why this is the case, and what the data shows, helps set proper expectations and guide decision-making.
Looking back at over a century of data, September consistently stands out as one of the weakest months in terms of average returns. Since 1928, the S&P 500 has averaged a decline of about -1.0% during September, and -1.7% since 2000. This performance is in stark contrast to other months like April or November, which typically boast more positive averages.
This phenomenon isn’t just a recent trend. In fact, between 1950 and 2023, the Dow Jones Industrial Average has dropped in September about 60% of the time.
The idea behind September’s poor performance is the impact of institutional investors, who may be adjusting their portfolios at the end of the third quarter. Additionally, the end of the summer typically sees lower trading volumes, which can lead to increased volatility as trading can have a larger impact on pricing.
The good news is that these declines are often relatively small and short-lived.
For savvy investors, September’s volatility doesn’t necessarily need to be a cause for alarm, in fact it can be an opportunity to take advantage of some mispricing.
It’s also worth noting that while September has historically been a weak month, there have been some notable exceptions. For instance, in 2010, the market posted a +8.8% gain, defying the typical September trend. Similarly, 2013 saw the index rise +3.0% in the month.
-Paul R. Rossi, CFA