We’re now just about two weeks away from the beginning of September, which has earned an unsavory reputation with investors over the years.
We’re now just about two weeks away from the beginning of September, which has earned an unsavory reputation with investors over the years. Historically, September has been the single worst-performing month for the S&P 500 Index (SPX), the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite (NASD) (Source: Stock Trader's Almanac). The Almanac says, “September is when leaves and stocks tend to fall; on Wall Street, it’s the worst month of all.” Since 1958, September is the only month in which the S&P 500 shows a negative median return and the last few years have done little to improve its reputation as the S&P 500 (SPX) was down -3.92%, -4.76%, -9.34%, and -4.9% in September 2020 – 2023, although the index did buck the trend last year, gaining a little over 2%.
As a result of the poor performance of equities, many investors look for opportunities in other assets in September. One asset that has received a lot of credit for helping investors through this frustrating month is gold, and the numbers below support this statement. Gold has posted a positive return in 22 out of the 38 Septembers since 1987. In other words, September has been a positive month for gold investments about 58% of the time. The average return for gold during all 38 Septembers comes out to 1.23%, with an average of 4.97% during positive Septembers. From 2020 – 2023, gold finished September in the red but generally performed favorably compared to equities, especially in 2022 when gold outperformed the S&P 500 by more than 7%. Last year, while the S&P was up more than 2%, gold advanced 4.6%.
In the table below, you will also see the historical September returns for different asset classes as far back as data exists in our system. Not surprisingly, assets like gold, oil, and bonds have provided the best returns.
However, up versus down is just half the story -- the magnitude of returns is another thing to consider. Take a look at the two international equity proxies in the table (the developed and emerging stock ETFs). Even though they have historically posted a gain more than 50% of the time, the losing years outweigh the winning years in terms of the magnitude of movement. For example, developed international stocks have seen gains in 53% of the Septembers going back to 1980, producing an average return of 3.5% in those years. However, during the 47% of the years when this index was down during September, the average loss was -5.27%. As a result, the average return for the month of September is in the red at -0.59%. Similar numbers can be seen for emerging markets and US small-cap equities.
Although September is generally viewed unfavorably by equity investors, there have been a few impressive outlying Septembers, such as 2007, 2009, and 2010, all of which saw gains of more than 3% for the S&P. Even though September has not generally been kind to the broad equity indexes, there have been opportunities provided by sector rotation. Take 2008 for instance. The S&P as a whole was down -9.20%, however, the DWA Bank Sector Index (DWABANK) actually provided a gain in excess of 5%. On the other side of the story, the Steel & Iron sector (DWASTEE) fell 31.8%, bringing the performance differential for September 2008 to 37.2%, the second-largest dispersion of all Septembers since 1999. In 2023, while SPX was down nearly 5% in September, the DWA Oil Index (DWAOIL) was up more than 2.5%.
On average, the difference between the best and worst-performing groups is around 20% over the last 25 years. Last year, non ferrous metals (DWAMETA) outperformed oil by 7.2%, which was the smallest differential over the lookback period. Meanwhile, the largest spread came in 1999 (40.5%).
In the table below, you can see the best and worst-performing sectors during September for each year going back to 1999. Precious metals (DWAPREC) have been the most frequent bottom performer, turning in the worst performance six times since 1999 (2006, 2013, 2014, 2017, 2019, and 2021), however, the precious metals index has also been the best-performing group in six out of the 24 years, more than any other group. Semiconductors (DAWSEMI) has been another frequent bottom performer, finishing last in five Septembers.
