Come September: The Weakest Market Month In U.S. Market History

 |  Includes: DIA, QQQ, SPY
by: Doug Short
At the threshold of September, let's take a quick look at performance of this month in market history. Over the long haul, September has been the weakest of the 12 calendar months. To illustrate the point, I'll use the Dow monthly closes as our proxy for the U.S. market and the year 1900 as our starting point. There have been 112 September Dow closes since 1900, one for every year except 1914, when the outbreak WW I in Europe prompted a four-month shutdown of the U.S. markets.
The adjacent table shows the average performance for the calendar months over this timeframe. The overall average monthly close has been a gain of 0.54%. September is one of three months with a negative average and by far the worst, with its -1.04% average.
The column of absolute averages (the percent change from zero) gives us a sense of the relative volatility of the monthly closes, which averages 3.85%. At 4.17%, September is a bit more volatile than the average, but the spread from the least volatile month (February) to the most volatile (November) is only 1.34%.
Ultimately the monthly averages tell us very little about the historical record. What's more revealing is a snapshot of the range of closes, shown below from low to high. I've also highlighted the 5.83% standard deviation for this series.
Click to enlarge
The chart above gives us a good sense of the extreme range of values, but what about the chronology of the data points and the distribution of those outliers? The next chart gives a visualization from which you can draw some conclusions.
Click to enlarge
We begin September of 2013 after a disappointing -4.45% August close in the Dow. The last time we had a negative August Dow was two years ago in 2011, when -4.36% was followed by an even worse -6.03% in September. In contrast, the year before that, in 2010, August closed at -4.31% but was followed by a most welcome 7.72% rally in September. Let's hope our current September takes its 2010 predecessor as a role model.
File this commentary under "market trivia".

Note: Based on data from the FRED repository for the Dow Jones Industrial Average