September has historically been the worst month of the year for stocks. Since 1950, on average in September, the Dow Industrials has fallen 1.0% and the S&P 500 has been down 0.7%. Meanwhile, since 1971, on average in September, the Nasdaq Composite has dropped 1.0%.
…But Not the Case Recently
Despite the markets’ historically poor performance in September, their recent track record has been much better. In fact, the Dow and Nasdaq have been up 4 of the last 5 Septembers, while the S&P has been up 5 of the last 6 Septembers. The only down September in the last handful of years occurred during the financial crisis of 2008.
That recent, more bullish trend is continuing this year too – albeit with more than half of September remaining. So far this month, the Dow is up 5.3%, the S&P is up 7.0% (best month since July 2009), and the Nasdaq is up 7.9% (best month since April 2009). In a bold statement, those three major indices have only been down on just one trading day this month so far.
A Strong September Bodes Well for Potential Q4 Gains
Another good sign for the stock market: when stocks have managed to eek out gains in September, they have normally kept the momentum going – often posting gains in the fourth quarter (from October through December). Here’s how the 3 major indices have fared:
- Since 1950, the Dow has been up 23 Septembers. On those occasions, the Dow has followed up with a Q4 gain 74% of the time, with an average return of up 3.4%
- Since 1950, the S&P has been up 27 Septembers. On those occasions, the S&P has followed up with a Q4 gain 81% of the time, with an average return of up 4.7%
- Since 1971, the Nasdaq has been up 21 Septembers. On those occasions, the Nasdaq has followed up with a Q4 gain 71% of the time, with an average return of up 3.6%.
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