September is traditionally the toughest month for stocks, but it was a mess,
A drop on Friday left the S&P 500 and the Dow Jones Industrial Average with their biggest monthly losses since March 2020. And it was the worst September performance for both indexes since 2002. Seasonally inclined investors may ask – know what this means for October.
Dow Jones Market Data took a look at how stocks have fared after some particularly brutal Septembers.
But first, how does the month that just ended stack up? The S&P 500 SPX,
fell 9.34%, while the Dow DJIA,
fell 8.84% and the Nasdaq Composite COMP,
decreased by 10.5%. The Nasdaq’s decline marked its worst September performance since 2008.
The sample size is limited. Not counting the current month, the S&P 500 has experienced a September decline of 7% or more 11 times dating back to 1928. The Dow has fallen 7% or more in September 13 times dating back to 1928. Nasdaq The Composite has fallen 9% or more in September six times since 1986.
Dow Jones Market Data found that in Octobers that follow a drop of 7% or more in September, the S&P 500 is up 0.53% on average in October and sees an average gain of 1.81%. This is better than the average for all Octobers of 0.47% and the average of 1.03%. October is positive in years following an outsized September loss 54.55% of the time, compared to 57.45% for all Octobers (see table below).
S&P 500
| Category | 7% or worse | all |
|
average |
0.53% |
0.47% |
|
average |
1.81% |
1.03% |
|
Worst performance |
-16.94% |
-21.76% |
|
Best performance |
16.30% |
16.30% |
|
% of the highest October |
54.55% |
57.45% |
Seasonal patterns, however, are only a guide. As MarketWatch’s Isabel Wang noted in a report on Friday, many strategists are skeptical of October’s reputation as a “bear killer.” They argued that a macroeconomic environment dominated by central banks aggressively tightening monetary policy in an attempt to stamp out inflation is likely to overshadow favorable seasonal factors.
Do not miss: Stock market bulls expect October to be another “bear killer.” Why skeptics aren’t convinced.
On the other hand, Dow Jones Market Data found that in the months of October following a September decline of 7% or more, the Dow has experienced an average decline of 1.51% and an average decline of 1.46%. That compares with an average increase of 0.37% for all Octobers and an average gain of 0.79%. The S&P 500 has risen 46.15% of the time in Octobers that follow a September drop of 7% or more, compared to a rise 57.6% of the time for all Octobers (see table below).
DJIA
| Category | 7% or worse | all |
|
average |
-1.51% |
0.37% |
|
average |
-1.46% |
0.79% |
|
Worst performance |
-20.36% |
-23.22% |
|
Best performance |
10.60% |
10.65% |
|
% of the highest October |
46.15% |
57.60% |
And here are the Nasdaq numbers for October after a 9% or more drop in September:
| Category | 9% or worse | all |
|
average |
2.19% |
0.73% |
|
average |
4.26% |
2.16% |
|
Worst performance |
-17.73% |
-27.23% |
|
Best performance |
17.17% |
17.17% |
|
% of the highest October |
50.00% |
54.90% |
Since 1950, September has been the worst-performing month of the year for the Dow Jones Industrial Average, S&P 500 and Russell 1000 and the worst for the Nasdaq Composite since 1971 and for the small-cap Russell 2000 since 1979. according to the Stock Trader’s Almanac. .
The stock finished sharply lower on Friday after getting off to a choppy start.
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