Stock market performance often seems unpredictable. One month stocks are up, the next month they’re down. Volatility seems to be the name of the game, right? Maybe, but there are some historical trends of stock performance that are actually quite noticeable if you crunch the data. One noteworthy trend is the “September Effect” – poor stock market performance in the month of September.
We first discussed the topic of this September swoon in prices in a prior post on stock market returns by month. Check out the data and the graphs in that post, and you can see that stock performance (S&P 500) in the month of September is not good over the long term.
Interesting findings from that post, specifically related to September, are:
- In the last 10 years, September is ranked 9th out of 12 months in stock performance
- During that decade, September is one of only 4 months with a negative monthly return (-0.97%)
- In the last 40 years, September is ranked 12th out of 12 months – dead last – in stock performance
- During those 4 decades, September was one of only 2 months with a negative monthly return (-0.77%)
Overall, it’s clear: September has offered low stock market returns over the short-term and long-term.
So, why is that the case? It’s an interesting question, as there have been some big drops in the market in September. Most recently, 2008 saw market drop 9.8% in September. Most of remember that market decline of just a few years ago. However, did you know that in 2002, the market dropped by even more in September? It dropped by 11%, actually.
Alright, so September hasn’t been the best month for stocks, over the long run. Maybe it’s best to enjoy the seasons changing, fall colors, the football season starting, or whatever suits your fancy. Just forget about making money in stocks in this particular month, right?
Not necessarily. September isn’t always a disaster. When I crunched the data some more, and looked at stock performance by month within the last decade, we can see that September has ranked across the board in returns, compared to other months in each year. Here is where the month ranked (out of 12) each year:
2010 – 1st
2009 – 6th
2008 – 11th
2007 – 2nd
2006 – 3rd
2005 – 5th
2004 – 9th
2003 – 10th
2002 – 12th
2001 – 11th
Clearly, it’s been across the board in that recent decade. There’s actually a good deal of variability in stock performance in September, on a year to year basis. It’s no slam dunk that there will be September Effect each and every year. This is where overall data can be a bit misleading.
That being said, there have still been enough bad Septembers that the overall stock performance for that month over the long term, compared to other months, has been shaky. It doesn’t mean that it will tank this year or next. Consider this for entertainment purposes if you will, but I’m still going to keep this in mind. 40 years is a long enough data set for me for me to at least take notice
My Questions for You:
Have you heard of the September Effect?
Do you believe in seasonal or historical stock trends, or do you believe that the market moves indpendent of such factors?
Would such information cause you think any differently about any pending stock moves during this time of year?