There's only been 3 other months heading into September when the SPX was up 10% or more
Stocks have performed well this year, with the S&P 500 Index (SPX) up 18% through August. Now, however, we must deal with September, which has historically been the worst month of the year. Since 1949, September has been the only month where the SPX has closed lower more often than it has risen, with a positive return just 45% of the time. It’s one of two months that has averaged a loss (February being the other) and its average return of -0.68% is the worst of all the months.
More recent data isn’t more encouraging. The second table below summarizes monthly returns since 2000. The SPX averaged a loss of 1.65% in September since then, again, the worst month of the year. However, this year is an election year, and we have positive momentum heading into September. In this article, I’ll break down September’s returns in the context of our current environment to assess whether we can be more optimistic.
A Look at Election Years
1949 was the first election cycle where election day was officially the Tuesday after the first Monday of November. Comparatively, September has fared a little better in election years compared to non-election years. Election year Septembers have been positive exactly half the time, compared to 42% of the time in non-election years. September has averaged a loss in election years but a smaller loss than otherwise (-0.37% compared to -0.77%).
Using 2024's Market Outperformance
The SPX gained 18% for the year heading into September. This should make us more hopeful because it seems the better stocks have done leading into September, the better stocks do in September. Since 1949, when the SPX was up double-digits on the year heading into September, the index gained 0.4% on average with 54% of the returns positive. When the index was positive but not by over 10%, it gained on average 0.14%, with 44% of the returns positive. In years where the SPX was down year-to-date heading into September, it lost on average 2.8% in the month of September with just 35% of the returns positive.
Election Years with Positive Momentum
Above, I showed stocks have done slightly better in September in election years and they’ve done much better in years where the SPX gained 10% year-to-date heading into the month. Let’s put it all together. Since 1949, there were three other times we headed into September during an election year with the SPX up 10% or more. In each of those three years, 2012, 1980, and 1976, the index increased between 2.26% and 2.52%. It’s only three data points, so no conclusion can be made, but maybe we can get a bit more optimistic on what has been the worst month of the year. On the other hand, in two of the three years below, the SPX fell over the last three months of the year after gaining over 2% in September.
