MP025: The “September Effect”: Myth, Data, and Market Perspective

Why September Stands Out

If you’ve heard of the “September Effect,” you already know the reputation. Over a century of data, every month of the year has averaged a positive return for the S&P 500—except September. Its historical average is a decline of about 0.8%.

At the other end of the spectrum sits July, the strongest month, with an average gain of nearly 2%. In 2025, July (and August) lived up to that record, delivering fresh all-time highs for the index.

Is September doomed to weak performance just because it has followed the good vibes of summer? Let’s dig deeper to understand what is behind these numbers.

Frequency and Outliers

What makes September unusual isn’t just the size of its average decline. It’s also the frequency. About half of all Septembers finish in the red, compared to the typical month, which is positive nearly two-thirds of the time.

But the averages hide the real story. If you look closer, September’s record is heavily influenced by about 10 extreme downturns since the 1920s. These coincided with global events and systemic stress—like the Great Depression, the dot-com collapse, and the 2008 financial crisis.

Remove just 10 outlier Septembers, including three from the Great Depression alone, and the month shifts from negative to positive. That tells us September’s reputation comes less from built-in seasonal weakness and more from a handful of extraordinary moments in market history.

Context for Today

Fast forward to today: we don’t see the same structural cracks that defined those historically bad Septembers. Surprises are always possible—markets have a way of delivering the unexpected—but current conditions look very different from the environments that produced those extreme outliers.

It’s also important to note the setup. After a strong 2025 summer run, with the S&P 500 posting multiple new highs, some cooling off is normal.

What Investors Can Do

At Vector, we emphasize a disciplined approach to rebalancing. After strong gains, rebalancing means trimming back what has grown ahead of expectations and reallocating towards other areas . This helps manage concentration risk and turns volatility into an opportunity.

So, is September truly cursed? Unlikely. More than anything, it reminds us that markets don’t move in straight lines—and even one of the world’s most consistent wealth-building engines has its off months.

The long-term trend remains clear: growth outweighs the setbacks. A diversified plan, paired with conditions-based rebalancing, provides the steady foundation investors need—through Septembers, through Octobers, and well beyond.

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