The SPDR S&P 500 ETF Trust (NYSE:SPY) closed the first day of September down 0.7%. Investors now start the month wondering if the "September Effect" is here and the market will once again post negative returns for the worst month of the year.
September Declines
Market experts and analysts often highlight seasonality for investors, with some sectors and the overall stock market showing patterns of positive or negative returns depending on the time of year.
Freedom Capital Markets Chief Market Strategist Jay Woods highlighted the September Effect of the stock market in his weekly newsletter.
"September is the worst month for the market, period," Woods said. "Going back to 1980, it's the only month that is negative on average."
The S&P 500 has been lower in four of the last five years, posting an average loss of 4.2%, Woods adds.
Here's a look at the monthly average returns since 1980, as reported by Freedom Capital Markets:
- January: +0.9%
- February: +0.2%
- March: +1.1%
- April: +1.5%
- May: +1.1%
- June: +0.4%
- July: +1.3%
- August: +0.1%
- September: -0.9%
- October: +1.2%
- November: +2.1%
- December: +1.2%
"I'm not quite sure Green Day was referring to the stock market when they wrote ‘Wake Me Up When September Ends,' but given its historical results the song is apropos," Woods said.
Woods said there are theories as to why the market sells off in September, but no real answers. Among the potential reasons include portfolio readjustments, taking gains, taking losses for tax purposes, coming back from summer vacation or selling assets to pay for education.
"Whatever the real reasons, it's a statistical fact that for nearly 100 years, going back to 1928, it is the worst performing month of the year with only a 55% chance that it finishes higher during that time."
Why It’s Important
The SPDR S&P 500 ETF Trust is currently up 9.5% year-to-date, with new all-time highs set last week, as the S&P 500 Index hit the 6,500 level for the first time.
In fact, the S&P 500 hit five new all-time highs during the month of August.
Woods said August was the fourth straight month with a positive return for the S&P 500. Here's a look at the current returns of the SPY for each month this year, as shared by Ycharts.
- January: +2.87%
- February: -1.4%
- March: -5.8%
- April: -0.8%
- May: +6.2%
- June: +5.0%
- July: +2.2%
The last four months have had positive returns and helped to offset a poor three-month stretch from February through April.
The S&P 500 is now positive in five of the eight completed months in 2025, with four months remaining.
September remains a key wild card with seasonal weakness and the upcoming Federal Reserve meeting that could see a rate cut and the market reaction.
If the market can make it out of September with a gain or slight loss, it could be smooth sailing the rest of the year. October and December are tied for the third-best month returns on average since 1980, with November ranking as the best monthly returns on average since 1980.
SPY Price Action
The SPDR S&P 500 ETF Trust was down 0.7% to $640.27 on Tuesday versus a 52-week trading range of $481.81 to $649.62. The ETF is up 9.5% year-to-date in 2025.
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