September Effect on Markets: Which Sectors Historically Underperform in Autumn

Key Takeaways

• Since 1945, August and September are the weakest consecutive months for the S&P 500, with both months showing average negative returns.
• Despite its historical weakness, September delivers positive returns in roughly 45 percent of all cases, limiting the predictive power of individual seasonal patterns.
• The VIX volatility index has risen an average of 8.2 percent in September since 1990 – the highest increase of all stock market months.
• Cyclical sectors such as technology, industrials, and materials see significantly steeper declines in September historically compared to the broader market.
• Defensive sectors – utilities, healthcare, and consumer staples – demonstrate markedly higher resilience during September weakness phases.
• Based on 25-year averages (2001–2025), November, April, and July rank among the strongest market months, while September, June, and August are the weakest.

Seasonality as a Statistical Framework, Not a Forecast

Seasonality describes recurring behavioral patterns in stock markets based on the calendar. According to an Interactive Brokers analysis from August 2026, it is "an average based on historical data showing how the stock market tends to develop over the course of a year." This statistical framework, however, explicitly does not serve as a forecasting tool. The sources emphasize that seasonality should be understood as "contextual background information," not as a precise prediction for the current year.

Historical averages encompass considerable dispersion of individual outcomes. Macroeconomic developments, monetary policy, earnings seasons, and geopolitical events can overlay or completely override seasonal effects in any given year. Despite these limitations, some investors use seasonal tendencies for strategic positioning – such as taking profits in statistically weak months or making countercyclical purchases during seasonally depressed phases.

September: The Historically Weakest Market Month

September stands out as one of the weakest stock market months throughout the year. According to data from Verdence Capital from April 2026, August and September have been the weakest consecutive months for the S&P 500 since 1945, with both months showing average negative returns. Multiple analyses from 2026 confirm this pattern: the S&P 500 shows "mixed to weaker statistical performance in late summer and early fall, with September historically standing out as one of the most unfavorable months."

Based on 25-year averages from 2001 to 2025, September ranks among the "weakest months" for both the NYSE Composite and the S&P 500. The data comes from TradeThatsSwing, published August 7, 2026. An important caveat: despite the negative average, September delivers positive returns in roughly 45 percent of all cases. Nearly half of all September months close in the black. Individual years frequently deviate significantly from the historical average.

Volatility and the "September Effect"

The VIX index – a gauge of expected volatility in the U.S. stock market – has risen an average of 8.2 percent in September since 1990. This figure represents the highest average VIX increase across all calendar months, as StoneX reported on September 2, 2025, in a historical observation. This elevated volatility characterizes the so-called "September Effect" – a combination of weaker returns and heightened uncertainty.

Seasonal Patterns Throughout the Year: Data Overview

Best and worst performance is distributed unevenly across the year. According to data from TradeThatsSwing (August 7, 2026), the following patterns emerge for the S&P 500 and NYSE Composite over 25 years (2001–2025):

Months with average positive performance: January, March, April, May, July, October, November, December

Months with weakness or negative performance: February, June, August, September

The three strongest months: November, April, July

The weakest months: September, June, August

Strong periods historically concentrate on spring (March through July) and year-end (November and December). These timeframes show both higher average returns and a higher probability of positive months.

August in Context: Mixed Picture Despite Recent Strength

August exhibits ambivalent characteristics. Over the past 20 years, the month closed higher for the S&P 500 and Nasdaq 100 in 65 percent of cases, with average gains exceeding 0.3 percent (S&P 500) and above 1 percent (Nasdaq 100). Over the past decade, performance has been even stronger. Nevertheless, August appears on "weakest months" lists when longer periods are examined – an indication of deterioration in earlier cycles.

Sector-Specific Performance in September: Defensive Versus Cyclical Sectors

September weakness does not affect all sectors equally. Sources from 2026 identify a clear divergence between defensive and cyclical sectors.

Resilient Sectors

Three defensive sectors have historically "demonstrated greater resilience" during September downturns:

• Consumer Staples: Manufacturers and retailers of food, household products, and other non-cyclical consumer goods.
• Utilities: Electric, gas, and water utilities with regulated revenues and stable cash flows.
• Healthcare: Pharmaceutical companies, medical device manufacturers, and healthcare service providers.

These sectors structurally offer protection against economic downturns, as their products and services remain in demand even during economically uncertain times. During September weakness, they act as relative outperformers and cushion portfolio losses.

Vulnerable Sectors

Three cyclical sectors "frequently experienced more significant declines during the month" compared to defensive alternatives:

• Materials: Mining, chemicals, construction materials, and metal processing industries.
• Industrials: Mechanical engineering, construction, transportation, and aviation.
• Technology: Software developers, semiconductors, IT service providers, and internet companies.

Cyclical sectors tend to amplify market movements, as their profits are more closely tied to economic growth. During market weakness phases in September, these sectors amplify the declines.

The January Barometer: A Complementary Seasonal Perspective

An additional seasonal rule is the "January Barometer," which states: "As January goes, so goes the rest of the year for stocks." Historical data since 1950 shows:

• January with positive returns: Average S&P 500 return for the full year around 17 percent
• January with negative returns: Average annual return around minus 1.7 percent

In January 2026, the S&P 500 closed up roughly 1.5 percent, with the Nasdaq 100 slightly positive. According to the barometer's historical correlation, 2026 would theoretically correspond to a positive market year. In 2025, when January was also positive, the S&P 500 achieved a full-year return of 16.96 percent – confirming the historical hit rate.

Methodological Limitations and Practical Application

The sources consistently emphasize the limits of seasonal patterns. Historical observations have significant constraints:

• High dispersion: Even weak months like September deliver positive returns in 45 percent of cases.
• Low predictive power: Averages serve as guidance, "but do not precisely forecast what will happen this year."
• Contextual, not predictive: Seasonality should be interpreted as "statistical background," not as a directional forecast.
• Year-to-year variance: Individual years "can and frequently deviate significantly" from historical norms.
• Overlapping factors: Macroeconomics, monetary policy, earnings season, and geopolitics regularly override seasonal effects.

Despite these limitations, the sources identify practical applications for investors and traders:

• Active traders: Close long positions more quickly during weak months; potentially avoid September altogether.
• Strategic timing: Buy index ETFs (SPY, IVV) during seasonally strong months when prices begin to rise.
• Calendar-based allocation: Make buy-and-hold investments during seasonally weak months to benefit from lower prices.
• Risk management: Adjust position sizes or strategies based on expected seasonal volatility patterns.

These applications treat seasonality as a complementary consideration, not as a primary decision driver. On today, August 31, 2026, the S&P 500 closed at 7,677.13 points with a daily loss of 0.47 percent, the DAX at 26,215 points with a decline of 1.27 percent – a market environment reflecting the historically weak transition from August to September.