The September Curse Is Real—But Selling Now Could Cost You More

Every year as September approaches, U.S. stock investors hear a familiar warning: September is the worst month for stocks. The historical data lends support to that claim. According to Bank of America, the S&P 500 has produced an average total return of negative 1.17% in September since 1928. Over nearly a century, the index has fallen in September 56% of the time. More notably, September is the only month with a negative long-term return record.

The seasonal pattern is not a myth. Carson Investment Research has pointed out that when the S&P 500 gains more than 1% in August and sets at least five record highs, the probability of a September decline rises further. This year’s market action appears to be meeting those conditions.

However, “usually” and “always” are two different things. A 56% historical decline rate in September also means the month has been positive 44% of the time. Rushing to sell based solely on historical averages may overlook the fuller picture.

Looking at a longer time horizon, the S&P 500 has returned an average of 13.4% over the twelve months following a record high, compared with an average of 11.9% across all twelve-month periods from 1988 through 2023. In other words, the market’s medium- to long-term performance after hitting new highs is often not weak. The opportunity cost of exiting the market just to avoid an average September decline of 1.17% could far exceed the potential loss.

Selling also carries real costs. If investors hold profitable positions, selling triggers capital gains taxes. The actual tax burden could easily surpass that 1.17% average September decline. Timing risk is another factor. Even if September does see a modest pullback, the market could suddenly surge on easing tensions in the Middle East, improving inflation data, or fading tariff uncertainty. A 10% monthly gain for the S&P 500 is not out of the question, and missing such a rebound would be difficult to recover from.

So what should investors do in September? Three steps are worth considering.

First, keep automatic investment contributions running. Regular, fixed-amount investing means that if the market does weaken, investors can buy more shares at more favorable prices rather than sitting on the sidelines.

Second, prepare a buy list in advance. Identify quality stocks you would be willing to buy if their prices fell by 10% in September. If a pullback materializes, you can act calmly instead of making rushed decisions.

Third, review whether the portfolio needs rebalancing. Some holdings may have become overweight after prior gains, and the overall stock-bond allocation may have drifted from its target. Using September to make measured adjustments is more rational than simply selling stocks.

September could indeed turn out to be a difficult month for U.S. equities, but positive surprises are also possible. Historical patterns offer guidance, but they cannot predict every market move. For most long-term investors, ignoring short-term noise and staying the course remains the more prudent choice.