Worst Average Returns Are Seen in September

Take 100 people and ask them this question:

"Historically speaking, in which month does the stock market perform the worst, on average?"

Of these 100 people, I'm guessing that at least half would say October.

The reason is simple - "Black Monday".

"Black Monday" took place on October 19th, 1987. This is the day when markets around the world plunged lower.

The Dow Jones Industrial Average fell 22.6% in just one day.

This day is forever etched into the minds of millions of people, and is the reason why many people believe that October is traditionally the worst month of the year for the markets.

Not true.

The worst month in terms of performance?

September (by far).

Since 1929, the DJIA has fallen an average of 1.46% in September.

Since 1971, the NASDAQ has dropped an average of 1.02% in September.

Since 1950, the S&P 500 has dropped an average of 0.69% in September.

September is the worst month of the year for the three major North American stock market indexes, and it's not even close.

For instance, the second worst month of the year for the Dow Jones Industrial Average is -0.11% (May).

October, the month that many investors have come to fear, is in actuality a decidedly boring month in terms of overall returns.

The DJIA is down just 0.03% in the month of October (since 1929), while the S&P 500 and Nasdaq are both higher (0.61% and 0.3% respectively).

Why is September such a horrible month?

There are a number of theories.

Many mutual funds have their fiscal year-ends in September, which could help to contribute to the selling pressure as they exit undesirable positions.

Or, maybe it's investors selling their positions in front of a month that they perceive to be harsh on market returns (October).

Or maybe it's another reason altogether.

Whatever the reason (or reasons), October often gets a bad rap for investors.

In reality, September has traditionally been a thorn in the side for investors.

Source: Dow Jones Industrial Average Historical Data

Nasdaq Historical Data

S&P 500 Historical Data

Filed under: General Knowledge