Skip to main content

Sound Advice: September 3, 2025

What's the worst time of year for the stock market?

Historical Patterns

The worst time of year for the stock market has historically been the month of September.  This trend, known as the "September Effect," is supported by data showing that major stock indices such as the S&P 500 and Dow Jones Industrial Average often record negative returns in this month.  Since 1950, the S&P 500’s average return in September is around -0.5%, making it the only month with consistent losses over such an extended period.  On a weekly basis, September also ranks low, with week 38 (typically in late September) posting the worst average return since 1926.

Why September?

Several factors may explain September’s poor performance:

  • Portfolio Rebalancing: Institutional investors often rebalance portfolios at the end of the third quarter, sometimes leading to stock selloffs.
  • Tax-Loss Harvesting: Some investors begin selling losing positions to realize tax losses as the year progresses, which can increase downward pressure on prices.
  • Economic Data and Earnings Worries: Anticipation of third-quarter earnings reports in early October may fuel market uncertainty.
  • Seasonal Slowdown: After lighter trading volumes during summer months, September’s return to full activity often brings volatility and declines.

Notable Events

Although October is notorious for market crashes, such as the 1929 crash and 1987’s Black Monday, the month does not consistently bring poor average returns.  Instead, October tends to be volatile but includes some periods of robust rebounds—its bad reputation stems more from a few dramatic episodes than from an ongoing trend of losses.

Supporting Data

Month

Average Stock Performance

Notable Points

September

Worst

Consistent average losses since 1950

October

Mixed/Volatile

Bad for crashes, but not consistently down

June, August

Sometimes Weak

Can also show negative seasonal patterns

Key Takeaway

  • September stands out as the consistently worst month for US stock market returns over nearly a century.
  • October’s negative reputation is due to dramatic crashes, not regular underperformance.
  • For most investors, experts recommend focusing on long-term strategies rather than adjusting portfolios based on seasonal trends.
In sum: If you’re looking for the “most dangerous” time of year for stocks based on historical averages, September is the month most commonly associated with weak performance and increased volatility.

N. Russell Wayne

Weston, CT  06883

 203-895-8877

 www.soundasset.blogspot.com 

Comments

Post a Comment

Popular posts from this blog

Sound Advice: January 3, 2025

2025 Market Forecasts: Stupidity Taken To An Extreme   If you know anything about stock market performance, you can only gag at the nonsense “esteemed forecasters” are now putting forth about the prospective path of stocks in the year ahead.   Our cousins in the UK would call this rubbish.   I would not be as kind. Leading the Ship of Fools is the forecast from the Chief Investment Strategist at Oppenheimer who is looking for a year-end 2025 level for the Standard & Poor’s Index of 7,100, a whopping 21% increase from the most recent standing.   Indeed, most of these folks are looking for double-digit gains.   Only two expect stocks to weaken. In the last 30 years, the market has risen by more than 20% only 15 times.   The exceptional span during that time was 1996-1999, which accounted for four of those jumps.   What followed in 2000 through 2002 was the polar opposite: 2000:      -9.1% 2001:     -11.9% ...
Post a Comment
Read more

Sound Advice: January 15, 2025

Why investors shouldn't pay attention to Wall Street forecasts   Investors shouldn't pay attention to Wall Street forecasts for several compelling reasons: Poor accuracy Wall Street forecasts have a terrible track record of accuracy. Studies show that their predictions are often no better than random chance, with accuracy rates as low as 47%   Some prominent analysts even perform worse, with accuracy ratings as low as 35% Consistent overestimation Analysts consistently overestimate earnings growth, predicting 10-12%                 annual growth when the reality is closer to 6%.   This overoptimism can                 lead investors to make overly aggressive bets in the market. Inability to predict unpredictable events The stock market is influenced by numerous unpredictable factors, including geopolitical events, technological changes, and company-specific news.   Anal...
Post a Comment
Read more

Sound Advice: July 16, 2025

Fixed annuities are poor investments Fixed annuities are often criticized as poor investments for several reasons, despite their reputation for providing stable, predictable income.  Here are the key drawbacks and concerns:   High Fees and Commissions Internal Fees:  Fixed annuities can carry a range of fees, including administrative charges, mortality expense risk fees, and rider fees. These can add up to 2%–4% per year, significantly eroding returns over time. Commissions:  Sales agents and financial advisors often receive high commissions for selling annuities—sometimes as much as 5%–8% of the invested amount. This creates a financial incentive for advisers to recommend them, even when they may not be the best fit for the client. Comparison to Other Investments:  Mutual funds and ETFs typically have much lower fees and commissions, making them more cost-effective for long-term growth. Limited Growth a...
Post a Comment
Read more