September is the only month of the year with a long-term negative average return on the U.S. stock market. But that statistic still doesn’t mean retail investors should change their strategy.
The statistics really don’t flatter September. Since 1928, the average move of the U.S. stock market in September has been a decline of 1.17%. While other months finished in the red in 39% of cases, for September it is 55%. On top of that, nine of the forty worst drops in the history of the S&P 500 index fall precisely in this month.
The phenomenon is so pronounced that Wall Street calls it the “September effect” — the seasonal tendency of stocks to weaken right after the summer holidays.
There are several explanations for it. Some explain the effect by pointing to the return of large fund managers from vacation, after which they begin rebalancing their portfolios or even taking profits. Others attribute it, for instance, to hedge funds, whose fiscal year typically ends in September, so they adjust their portfolios and harvest tax losses. The sale of losing stocks for tax reasons also plays a role, and apparently so does the very expectation of a weak month.
The average, however, hides an important detail. In September 2025 the S&P 500 gained 3.5%, marking its fifth rising month in a row and the best September since 2010. U.S. stocks are entering this September after a relatively strong year despite global uncertainty, and the index has been trading at record highs in recent weeks. But the situation is uncertain. The conflict in the Middle East is escalating again after the weekend and oil prices are rising. At the same time, expectations are growing in the market that the U.S. central bank will raise interest rates. Strong earnings-season numbers, supported by Nvidia’s record results, could push the market further upward. Risks have increased after the summer, though, so a mild drop would not be surprising. A significant market decline, however, is not likely.
However, the downside from missing even a single strong day in the market is likely greater than the potential loss investors might be trying to avoid by selling stocks at the start of September. According to an analysis of data from 1996 to 2025, ten thousand dollars invested in the S&P 500 would have grown to $192,167 over those thirty years. If the investor had missed just the ten best trading days over the same period, they would have $85,490 — 56% less. Missing the thirty strongest days would leave them with $31,123, 84% less.
For retail investors, a fairly simple conclusion follows. Trying to time the market does not pay off. The best approach is to invest for the long term and regularly, and to ride out seasonal swings in the market. Although we don’t know whether this September will be one of the weak ones, for a long-term investor it doesn’t make much difference.
