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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 

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