TLDR
- September is historically the worst month for the S&P 500, Dow Jones, and Nasdaq Composite
- The S&P 500 and Dow have each averaged a 1.1% decline in September, with win rates below 45%
- The Federal Reserve’s September 16 rate decision is being watched closely after rate hike odds rose from 35% to 60%
- Fund managers returning from summer breaks tend to rebalance portfolios, which can weigh on markets
- Long-term investors who skip September historically reduce their overall returns and increase their tax burden
September has a bad reputation on Wall Street, and the numbers back it up. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all post their weakest average monthly returns in September, according to Dow Jones Market Data.
Get ready to hear this a lot this week.
Since 1950, September is the worst month
The past 10 years, September is the worst month
The past 20 years, September is the worst month
In a midterm year, September is the 10th worst month (only Jan and June are worse) pic.twitter.com/JHQ7FhDOKa— Ryan Detrick, CMT (@RyanDetrick) August 30, 2026
The S&P 500 and Dow have each dropped an average of 1.1% in September. The S&P 500 has posted positive returns in only 44.5% of Septembers on record. The Dow’s win rate is even lower at 42.6%.
The Nasdaq has fared slightly better, rising in 52.7% of Septembers since 1971. But the average September move for the index is still a 0.8% decline.
Why September Tends to Be Weak
There is no single cause for the pattern. One theory is that fund managers return from summer vacations and rebalance their portfolios. They may sell underperformers to lock in losses for tax purposes before year-end.
The Federal Reserve’s mid-September interest rate decision also plays a role. Media coverage of the so-called “September Effect” can push investors to trim positions in late August, adding to early selling pressure.
Arnim Holzer, global macro strategist at Easterly EAB, describes September as a “historically less forgiving period” for equities.
This year, traders are paying close attention to the Fed’s September 16 meeting. After Fed Chair Kevin Warsh spoke at Jackson Hole about the need to keep bringing inflation down, the odds of a rate hike jumped from 35% to 60%, according to CME FedWatch.
Treasury yields have also been climbing. The 10-year yield has risen from 4.2% to 4.7% over the course of the year.
Peter Boockvar of One Point BFG Wealth Partners says the bond market may matter more than the Fed right now. He says the yield curve has already priced in a higher cost of capital, and that inflation data has limited the Fed’s options.
Why Long-Term Investors May Not Need to Worry
Ryan Detrick, chief market strategist at Carson Group, points out that the worst Septembers in history came during already weak or uncertain markets. He says this year does not fit that profile.
The S&P 500 gained about 3% in August, and Detrick notes that in 11 similar setups since World War II, September only brought losses once.
Still, Melissa Browne of SimCorp cautions that strong August gains can be hard to follow up on, especially with earnings season quiet and rates still elevated.
For investors considering sitting out September, the math is not encouraging. Data shows that skipping September each year since 2021 would have produced a 136% return versus 124% for buy-and-hold investors, but capital gains taxes would erase most of that advantage.
Key economic data arrives early in September. The ISM Manufacturing PMI comes out September 1, the jobs report on September 4, and the August consumer price index on September 11.
The July jobs report showed a loss of 23,000 jobs, making the August reading closely watched.
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