September Almanac: No Relief in Pre-Election Years for Worst Month
By: Jeffrey A. Hirsch & Christopher Mistal
August 24, 2023
Start of the business year, end of summer vacations, and back to school made September a leading barometer month in first 60 years of 20th century, now portfolio managers back after Labor Day tend to clean house. Since 1950, September has been the worst performing month of the year for DJIA, S&P 500, NASDAQ (since 1971), Russell 1000 and Russell 2000 (since 1979). September was creamed four years straight from 1999-2002 after four solid years from 1995-1998 during the bubble madness. More recently, S&P 500 has been down in six of the last nine Septembers. September gets no respite from positive pre-election year forces.
[Pre-Election Year September Performance Table]
Although the month used to open strong, S&P 500 has declined nine times in the last fifteen years on the first trading day. With fund managers tending to sell underperforming positions ahead of the end of the third quarter there have been some nasty selloffs near month-end over the years. Recent substantial declines occurred following the terrorist attacks in 2001 (DJIA: –11.1%), 2002 (DJIA –12.4%), the collapse of Lehman Brothers in 2008 (DJIA: –6.0%), U.S. debt ceiling debacle in 2011 (DJIA –6.0%) and in 2022 (DJIA –8.8%).
[Recent 21-Year September Seasonal Pattern Chart]
September Triple Witching week is generally bullish with S&P 500 advancing nearly twice as many times as declining since 1990 but is has suffered some sizable losses and been down four or five years in a row depending on index. Triple-Witching Friday was essentially a sure bet for the bulls from 2004 to 2011 but has been a loser eight or nine of the last eleven years, depending on index with S&P 500 weakest, down ten of the last eleven. The week after Triple Witching has been brutal, down 26 of the last 33, averaging an S&P 500 loss of 1.01%. In 2011, DJIA and S&P 500 both lost in excess of 6%.
Labor Day has become the unofficial end of summer and the three-day weekend has become prime vacation time for many. Business activity ahead of the holiday was more energetic in the old days. From 1950 through 1977 the three days before Labor Day pushed the DJIA higher in twenty-five of twenty-eight years. Bullishness has since shifted to favor the Wednesday after the holiday as opposed to the days before. DJIA has gained in 21 of the last 28 Wednesdays following Labor Day. Tuesday after Labor Day also leaned bullish, but DJIA has declined on 11 of the last 15.
[September Vital Stats Table]