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In this issue:
- Global Equity Market Performance
- Fall
- All Months
- September Strategy
- Wrapping Up
Global Equity Market Performance
After a rough July, MSCI Emerging Markets led the pack in August, rising 3.9%. The S&P 500 edged out the S&P/TSX 60, up 2.6% versus 2.3%. MSCI EAFE was the laggard, adding just 0.5%.
As of this writing—the second week of September—our systems are indicating positive momentum in all four equity markets.
If you would like to stay current on our measures of trend and momentum in the markets we follow, please click here.
This letter looks at September’s historical performance and whether the data offer any practical ways to manage risk.
Fall
There are many market stories about specific months or seasons that have circulated for years. In our October 2023 letter we looked at which month has been worse, September or October. It turns out September is the worst, even though many people think October holds that title. 1929 is in the history books. Black Thursday, Black Monday and Black Tuesday—all in October—were not good. October 1929 ended down 19.9%.
1987 and 2008 are also in the history books, but for some of us older types, we actually experienced them. In October 1987 the market crashed 21.9% and in October 2008 it fell 16.9%. That’s perhaps one reason October is in the memory banks.
September holds the record for the worst single month in the available data, down 29.9% in 1931. That was a particularly bad year, finishing down 47.1%.
In the chart below of all monthly returns, September is highlighted in blue for a positive month and red for a negative one.
Visually, September stands out. Particularly the red.
Let’s look at the numbers for each month going back to 1927.
All Months
Here we look at several characteristics of the monthly returns.
Note: We are using Macrotrends data based on Robert Shiller’s dataset. Prior to March 1957, this reflects the S&P 90 Index (the predecessor to the modern S&P 500). The series are combined for continuity.
In the table below, we summarize S&P 500 monthly behaviour since 1927 using eight statistics:
- Average Return – mean return for the month
- Volatility – how much returns for that month tend to vary
- Return/Volatility – risk-adjusted return (average return divided by volatility)
- Maximum Return – largest one‑month gain on record
- Minimum Return – largest one‑month loss on record
- Average Gain – average return when the month was positive
- Average Loss – average return when the month was negative
- Positive Months (%) – percentage of times the month finished higher
Large gains and large losses can cluster together. You can see that in the bar chart of all monthly returns above. A month with a high average return may also show high volatility and big swings in both directions. That’s why we use multiple measures instead of relying on a single number.
Three simple statistics for September stand out in the table. The average return is negative, the largest loss was 29.9% and it finished positive just 44.9% of the time in our sample. Every other calendar month finished higher more than half the time.
Since the characteristics of every month do not stand out as clearly, we scored each month across these eight measures and combined the results into a single “normalized score.” Higher normalized scores indicate months that have historically looked more attractive across these statistics. Lower scores indicate months that have looked less attractive.
Note: these numbers are purely historical. They describe what has happened, not what will happen.
This might come in handy the next time we are asked about months or seasons, which happens regularly.
By this simple scorecard, July ranks first and September last.
The question: Is there anything useful we can do with this information?
September Strategy
To be clear, our systematic strategies are not built on seasonal statistics. We use daily, rather than monthly, data and account for the costs of trading.
Just for fun, let’s test a simple strategy with one rule: don’t own the S&P 500 in September. We can run that, as close to real life as possible, starting in 1993.
In January 1993, what is now the State Street SPDR S&P 500 ETF Trust (SPY) was launched. Before the advent of SPY, running a strategy that avoided September would have meant selling 500 stocks on a market-capitalization‑weighted basis on the last trading day of August and buying them all back in the same proportions on the last day of September.
Now it’s simple: trade SPY.
The following analysis does not include commissions, bid-ask spreads, taxes or interest earned on cash. It is as close to a costless simulation as you could get by selling and then buying again to avoid September.
If this strategy had been perfectly executed starting in 1993, your average annual return would have improved by 30 basis points. Yes, volatility and drawdown are lower, but 30 basis points is not much of an incremental return for the effort.
Once again, unfortunately, we find there is no secret formula to beat the market. There clearly is a statistical pattern, but it would be difficult to exploit in practice.
Recent Developments
On August 17, ETF.com reported: “Volatility Shares has filed to launch an exchange-traded fund for every NHL team, a set of products unlike anything currently trading. The registration, filed Aug. 14, covers all 32 teams… each tied to one franchise’s on-ice performance.” Considering the number of sports betting app commercials on TV, it’s probably not surprising that Wall Street wants in on the action.
In related news, around the same time Yahoo reported on data from Betterment’s 2026 Retail Investor Survey. Among Gen Z investors, 26% say they treat sports betting as a deliberate part of their long‑term financial strategy. More than half—52%—report they have redirected money originally set aside for investing into sports bets at least once in the past year. For context, only 14% of millennials, 6% of Gen X and 1% of baby boomers say the same.
On September 14, the 10-year Treasury yield traded above 5.00%. That’s up from 4.72% mid-August and the highest it’s been in three years. Canadian government bonds have moved in a similar direction. In mid-August, the Canadian 10-year was roughly 3.65%. On September 14, it traded as high as 3.98%. That’s the highest it’s been since October 2023.
Today, September 16, the Fed met and decided to raise the target rate by 25 basis points to a range of 3.75%-4.00%. When we wrote last month’s letter, the odds of a rate hike were 33.1%. Yesterday they were 93.5%. It looks like the market got it right.
As of today, the S&P/TSX 60 is down 1.7% month-to-date and the S&P 500 is down 1.9%.
Wrapping Up
The numbers confirm that September has been the toughest month for U.S. stocks since 1927. They also show that trying to sidestep it adds complexity without much payoff.
The investment landscape is always changing. Wars, rapid changes in yields, and tariffs are nothing new. That’s why a disciplined process matters more than stories. Our focus remains on systematic, rules-based strategies that respond to trends in prices rather than the month on the calendar.
Casinos are designed to distract you and optimized to empty your wallet. Wall Street can show similar tendencies, packaging new products that blur the line between investing and gambling. We do our best not to get distracted by the latest “thing” and stay focused on process and evidence.
The last day of summer is Tuesday, September 22. In a few weeks, October arrives along with the postseason for a certain professional sports league. A few positive surprises this fall would be welcome—in markets and in baseball.
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