When Green Day said “wake me up when September ends” they put into words how we all feel looking at the market when summer wraps up.
It’s not just in your head: The stock market stinks in September. Over the past decade, September has consistently been the worst performing month for the S&P 500, with an average decline of about 2%. In six of those past 10 years, the month has ended in the red.
But the “why” is less straightforward than the historical record itself. Is it the post-summer vacation hangover? The first taste of pumpkin spice lattes that get disgustingly sweeter every year? Anxiety over planning the perfect Halloween costume?
Some explanations are more grounded in reality. One factor is the yearly rebalancing that takes place after the summer. Many professional money managers finally get back to their desks after an August of vacationing and make changes to their portfolios, contributing to volatility in the market. Another phenomenon is that traders are gearing for the end of the year by using tax-loss harvesting strategies, also contributing to the downward pressure of stocks.
It’s hard to say goodbye to summer
There’s another theory based more on human psychology than on financials: everyone is starting to get the winter blues. MarketWatch’s Mark Hulbert noted that as the seasons change and summer cools down, it kicks off an early bout of seasonal affective disorder (SAD) across the market. Studies show that when investors get SAD, they tend to see everything from corporate earnings to economic data in a far more pessimistic light—and their bad mojo pushes stocks lower.
That all being said, there are actually a bunch of optimistic catalysts for the market this particular September, including a likely Fed rate cut and the glow of a record-breaking corporate earnings season, explained UBS Global Head of Equities Ulrike Hoffmann-Burchardi.
“Despite the potential for volatility and short-term pullbacks, we believe investors who are underallocated to equities should consider phasing in and using market dips to add equity exposure. In our base case, we expect the S&P 500 to reach 6,800 by end-June 2026, implying around 5% further upside,” explained Hoffmann-Burchardi.
The bottom line: The dip in stocks in September is normal, and nothing to worry about—so don’t get too SAD about it.—LB
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