S&P 500 Seasonality: The Chart That Sends Shivers Down Spines In September, But With Peculiar Twist

In the world of financial markets, September brings a sense of dread that’s hard to shake. It’s the month that has Wall Street on edge, and for good reason.

A recent in-depth seasonality analysis on the S&P 500 Index conducted by Bank of America analyst Stephen Suttmeier, CFA, paints a rather chilling picture.

Spanning nearly a century of market data dating back to 1928, September emerges as the worst month of the year for the U.S. stock market.

The statistics are a stark reminder: September has witnessed the S&P 500 closing positively only 44% of the time, a revelation that already points to a rather unfavorable track record. Furthermore, the average return in September shows a decline of 1.2%, the worst than in other month of the year.

Even when narrowing the lens to focus on last quarter of a century, September’s bearish sentiment remains intact. The data reflects an average decline of 0.53%, the highest among all the months.

Chart: Monthly Returns Of S&P 500 Index (1998-2023)

Why There’s A Glimmer Of Hope In 2023

According to the Bank of America study, when the S&P 500 posts year-to-date gains through August, September has historically shown better performance, with positive returns occurring 49% of the time. Yet these gains are relatively modest, with an average return of 0.08%.

Conversely, when the S&P 500 is in the red year-to-date through August (although this isn’t the case for 2023), September has historically struggled. It has seen positive returns only 34% of the time, and these returns are notably negative, averaging a negative 3.61%.

Delving deeper into the data, an exceptionally strong rally of 20% or more in the S&P 500 year-to-date through August might not bode well for September and the rest of the year. In this scenario, September shows positive returns in only 45% of cases, with an average return of negative 0.67%

There is a silver lining. The most robust September and subsequent year-end returns tend to occur when the S&P 500 registers more moderate gains of 10% to 20% year-to-date through August.

Out of the 23 instances when the S&P 500 had posted year-to-date gains ranging between 10% and 20% through August, it exhibited positive performance in an impressive 65% of those cases. The average return during these instances amounted to a noteworthy 0.77%.

In 2023, the SPDR S&P 500 ETF Trust SPY has indeed delivered a year-to-date return of 17.4% through August, fitting snugly into this historically favorable “sweet spot.”

Statistic	S&P 500 September returns for all years (since 1928)	September returns when the S&P 500 is up 10%-20% YTD through August	September returns when the S&P 500 is up 20%+ YTD through August
Average	-1.16%	0.77%	-0.67%
Median	-0.49%	1.49%	-0.65%
% of time up	44.21%	65.22%	45.45%
Max	14.40%	4.84%	8.31%
Min	-29.94%	-8.54%	-12.35%
Std Dev	5.74%	2.86%	5.50%
#obs	95	23	11

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Photo via Pixabay.