The S&P 500 index has begun September on a somber note, dropping 2.8% in the first 10 days of the month. This makes it the fifth-worst start for September in the last 25 years, trailing only 2020 (-5.31%), 2011 (-4.15%), 2008 (-3.34%), and 2001 (-2.97%). While the initial month weakness is already noticeable, historical seasonality suggests that the worst may still be ahead.
Historically, September is known as one of the worst-performing months for the S&P 500. The early days of September often set the tone for the rest of the month. An analysis by Benzinga, powered by the AI tool ‘seasonality.ai,’ reveals that over the past 25 years, the SPDR S&P 500 ETF Trust (SPY) has experienced negative returns in the first 10 days of September on 14 occasions, with a slightly negative average return (-0.14%). However, not all September starts are bleak. In 2009, for instance, the index saw a 4.58% rally in the first 10 days, marking the best start in the dataset. The worst starts occurred in 2020, when the S&P 500 plunged 5.31% in the first 10 days of the month, followed by 2011 (-4.15%) and 2008 (-3.34%).
Unfortunately, the seasonality trend worsens as the month progresses. Historical data shows that from September 11th to September 30th, the S&P 500 tends to suffer even more. Over the last 25 years, the index has declined an average of 1.69% during these remaining 20 days, indicating that the second half of the month often compounds early losses. The latter part of September has been negative 16 times in the past 25 years—more than two-thirds of the time.
Some years have witnessed catastrophic declines during this period. In 2022, the S&P 500 plunged by 13.09% during the last 20 days of September, marking its worst late-September performance in recent history. This sharp decline was largely driven by investor anxiety following the September 2022 FOMC meeting, where the Federal Reserve delivered its third consecutive 75-basis-point rate hike, pushing the federal funds rate to a range of 3.00% to 3.25%. This aggressive tightening aimed to combat inflation, which was hovering around 8-9% at the time. On the day of the rate decision, the S&P 500 dropped 1.7% as Fed Chair Jerome Powell signaled that the central bank would continue raising rates “until the job is done,” intensifying concerns about a prolonged tightening cycle and its potential impact on the economy.
Other severe drops include 2002, when the index lost 10.25%, and 2008, with a 7.59% fall. The trend of weak late-September performance isn’t limited to bear markets. Even in traditionally bullish years, the S&P 500 often stumbles. In 2023, the index lost 4.68% in the last 20 days of the month, while 2019 saw a 1.2% decline. However, not every bullish year is negative—2007 and 2006 both saw gains of 3.45% and 2.43%, respectively, but these instances represent the exception rather than the rule.
