As summer winds down, investors often find themselves facing a familiar question: why does September seem to bring more market volatility than any other month? History shows that September has long carried a reputation as the most challenging month for equities—a pattern worth exploring as we prepare for the weeks ahead.
A Historical Pattern
Market historians have dubbed this phenomenon the “September Effect.” Since 1928, the S&P 500 has averaged a decline of roughly 1% in September (Stock Trader’s Almanac, 2023 Edition). This trend is not just anecdotal: Morningstar research confirms that September has historically delivered lower average returns and a higher frequency of negative months compared to the rest of the year (Morningstar Direct, 2024).
For instance:
- Between 1950 and 2023, the Dow Jones Industrial Average fell in September more often than it rose (Stock Trader’s Almanac).
- The S&P 500 has posted positive returns in only about 45% of Septembers, compared with ~55% across all other months (CFRA Research, “The September Effect,” 2022).
- Even global markets reflect this tendency—studies show September weakness in both the MSCI World Index and MSCI EAFE Index (Bloomberg, historical index data).
Possible Explanations
Why does this happen? Economists point to several factors:
- Investor psychology and seasonality: After summer, many institutions and fund managers rebalance portfolios, sometimes triggering broad sell-offs.
- Tax considerations: Mutual funds may sell positions to realize gains (or losses) ahead of their fiscal year-end, which often falls in September (Investment Company Institute, 2023 Fact Book).
- Economic data flow: September coincides with a heavy slate of economic reports that set the tone for year-end policy moves by the Federal Reserve (Federal Reserve, FOMC historical calendars).
While no single explanation fully accounts for the pattern, the historical record is hard to ignore.
What It Means for Long-Term Investors
It’s important to stress: September volatility is not a reason for alarm—it’s a reason for perspective.
Markets are forward-looking, and while seasonal trends exist, they are never guarantees. For example, in September 2010 and again in 2013, the S&P 500 delivered gains of more than 3% (S&P Dow Jones Indices historical data), defying the “September Effect.”
The key takeaway is this: volatility often creates opportunity. By maintaining a diversified portfolio, staying disciplined, and avoiding emotional reactions to seasonal swings, investors are better positioned to capture long-term growth.
Final Thoughts
As your financial advisor, I believe preparation and perspective are the best tools for navigating historically choppy waters. Rather than fearing September, we use it as a reminder to stay grounded in fundamentals, focused on your long-term plan, and ready to adjust strategies where prudent.
If you’d like to review your portfolio in light of current conditions—or simply want to discuss how we are positioning accounts for the remainder of the year—please reach out.
September 2025
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
