Fisher Investments Reviews: Should Investors Fear the ‘September Effect’?

Fisher Investments understands the temptation to avoid any potential market downside. But while such seasonal narratives may catch attention, relying on overly simplistic, backward-looking analyses like the “September Effect” or “Sell in May” can mislead long-term investors. So, is it wise to exit the market simply because the calendar turns to September? We believe the answer is no.

Is September Actually Bad for Stocks?

September naysayers point out the month’s history can appear bad for stocks. Indeed, since reliable market data began in 1926, September is not only the worst average month, but the only month to average negative returns at -0.75% (Exhibit 1)^[i]. Pundits also point out that September has featured some major market declines, including a 29.6% fall in 1931 amid the Great Depression—the worst single month on record.

Exhibit 1: Average Stock Returns by Month

Source: Finaeon, as of 6/25/2025. S&P 500 Total Return, monthly, 12/31/1925 – 12/31/2024.

We’re not here to dispute historical facts. However, we think it’s important to consider the facts in the right context. By definition, average return data includes all observations, including outliers—such as the Great Depression example. Is it possible to see another nearly thirty percent drop in a single month, regardless of which month it is? Yes, it’s possible. Is it very likely? History suggests otherwise.

The Truth Behind September Returns

Exhibit 2 shows the distribution of stock returns for September. Despite the negative reputation, September’s returns have been slightly more frequently positive (52%) than negative (48%)^[ii]—a bit better than a coin flip. While less frequently positive than other months, this reinforces our belief that selling out of September is hardly guaranteed to be a good decision.

Exhibit 2: Distribution of Stock Returns for September Since 1925

Source: Finaeon, as of 6/25/2025. S&P 500 Total Return, monthly, 12/31/1925 – 12/31/2024. Shaded boxes indicate negative Septembers that occurred during pre-existing bear markets.

Additionally, as we alluded to, many of September’s worst returns occurred during pre-existing bear markets (gold outlines above) with fundamental causes having nothing to do with September itself. We’ve already touched on the Great Depression years, but consider the effect of the Tech Bubble in the early 2000s or the Great Financial Crisis from 2007-2009. These events were surely celestially agnostic but contribute to September’s less-than-rosy reputation. Some people see a seasonal pattern, but in our view, September’s struggles seem spurious at best.

Stocks don’t care about calendar years, which month it is, or what you had for breakfast. They move on the difference between investor expectations versus how actual economic and political realities develop. Unless you have a strong, fundamental reason to be out of the market for any period—regardless of which month it is—the opportunity cost of short-term market timing is too high, in our view.

Moreover, markets are efficient in part because investors constantly seek an edge. If there was a good reason stocks consistently performed poorly in September, investors would respond by selling beforehand, pushing stocks down in August instead, and so forth. Investors would take notice and the cycle would continue until no trace of a seasonal pattern remained.

Seasonal Market Strategies Are Flawed

Maybe this September turns out negative, or maybe it doesn't. You can't know today. But in our view, long-term investors shouldn’t fret a single month’s return. The belief in calendar-based stock strategies like the “September Effect,” “Sell in May,” or the “Santa Claus Rally” assumes that past performance can predict future returns. This assumption is flawed—the stock market efficiently incorporates widely known information, and seasonal trends cannot predict future market movements reliably. If a calendar-based forecasting tool had predictive power, efficient markets have already considered it, sapping any potential advantage.

Want to Dig Deeper?

For more analysis on this seasonal investing myth, you can read Fisher Investments’ MarketMinder article, “September Isn’t a Danger to Your Portfolio—But Seasonality Myths Are”.

Additionally, check out the Fisher Investments article, “2024 in Review: Seasonality Edition” for a broader look at seasonal investing myths.