S&P 500, Dow average 1.1% September declines as seasonal drag looms

The S&P 500 and Dow have each averaged a 1.1 percent September decline since 1928, the only month with a negative long-term mean, while the Nasdaq Composite has also trended lower.

Hartford Funds data shows 48 percent of the S&P 500's 50 best trading days since 1996 occurred during bear markets, a finding that argues against selling into September weakness.

The S&P 500 has fallen in 56 percent of Septembers since 1928 and has never posted a positive average return for the month since its 1957 inception. The Nasdaq-100 has dropped by an average of 2.1 percent in September from 2017 to 2025, with negative returns 67 percent of the time, including a 10.6 percent slide in September 2022.

Missing the market's best days carries a steep cost: $10,000 invested in the S&P 500 in 1996 would have grown to $192,167 by 2025, but skipping the 10 best days would cut that to $85,490. For investors, the more durable strategy is to treat any September pullback as a buying opportunity rather than a reason to exit.

Midterm Years Deepen the September Slump

The pattern intensifies in midterm election years. The S&P 500 has fallen in six of the past 10 midterm Septembers at an average of about 2 percent, and midterm years have posted a negative September average since 1942, according to Carson Investment Research. Three factors typically drive the so-called September effect: institutional rebalancing after summer, the Federal Reserve's mid-September rate decision, and preemptive selling by retail investors reacting to the seasonal narrative.

Timing the Calendar Rarely Pays After Taxes

The math behind seasonal trading strategies is less compelling than the fear they generate. An investor who held the S&P 500 only from January through August each year since 2021 would have earned a total return of 66 percent, versus 124 percent for buy-and-hold. Skipping only September would have produced 136 percent, but capital gains taxes would erase most of that edge in taxable accounts.

The broader context also argues against timing the market around a single month. From 1988 through 2023, the S&P 500 returned an average of 13.4 percent over the 12 months following a record high, compared with 11.9 percent for all 12-month periods. Selling into September weakness risks exiting just before conditions improve.

AI stocks are especially prone to sharp September sell-offs. Nvidia shares dropped 11.8 percent in September 2023, 19.5 percent in September 2022, and 7.4 percent in September 2021, though they have averaged gains of more than 5 percent in both October and November from 2017 to 2025.

The seasonal pattern is real but not reliably tradeable, and the costs of acting on it, in taxes and missed gains, typically exceed the benefit of avoiding a sub-1.5 percent average monthly dip. The S&P 500 has delivered an average annual total return of about 10 percent since 1957 despite recurring seasonal soft patches, rewarding investors who stayed fully invested through every September.

This article is for informational purposes only and does not constitute investment advice.