September has a long history of being the worst month for stocks, averaging a 0.56% decline in the S&P 500 (and its predecessor) since the end of WWII, according to an article in Chief Investment Officer that cites a study by Sam Stovall of CFRA.
Small-cap stocks usually get hit along with large-cap stocks in the S&P 500, with the Russell 2000 declining 0.31% on average in September. In fact, it’s “the only month in which the market fell more frequently than it rose,” Stovall writes in the study. And this particular September may be harder hit; the summertime rally that ended in mid-August appears to have been a blip in the midst of the bear market that’s been roaring since the beginning of the year, with many blaming the Fed’s aggressive fixation on battling inflation for the current downturn.
Some strategists posit that September is the worst month for stocks because investors come back from their summer vacations, reassess their holdings and get rid of unwanted shares. Others believe that mutual funds tend to clear their inventories in advance of the fiscal year’s end on October 31st. Whichever theory you subscribe to, the fact remains that famous crashes throughout history have started in September: 1929, 1987, and 2008, the latter being when Lehman Brothers’ demise sparked the global financial crisis, the article reminds us.