At the beginning of August, the stock markets suffered a collapse. In fact, August is a seasonally weak month – since 1970 it has been the second weakest in the annual cycle.
But there is an even weaker month: September.
Does this mean further trouble is imminent?
Let’s take a closer look at September from a seasonal perspective.
The stock market by month
The bar chart shows you the average performance of the S&P 500 in percent since 1970, sorted by calendar month.
S&P 500, average performance, in percent, since 1970
September is the weakest month. Source: Seasonax
As you can see, September stands out with a red bar. It points downwards. September is the only month that had an average loss. This was over one percent. For an average monthly return, this is quite a remarkable value.
The biggest slowdown is expected from mid-September
But how exactly does the seasonal weakness develop? Take a look at the seasonality of the US stock index S&P 500 in the day-by-day seasonal chart.
For the index, I chose the detrended seasonal trend. Detrending removes the overarching trend. The end point of the chart is at the starting point. To do this, the overarching price movement is deducted proportionally across all days.
You can easily turn on detrending in Seasonax by clicking on the button with the arrow symbol above the chart:
Detrending switch in Seasonax
Detrending makes the seasonal trend more visible. Source: Seasonax
In the detrended chart, you can visually identify the seasonal trend more quickly. This makes it easier to analyze periods of weakness in instruments that have risen in the past.
The next chart shows you the detrended seasonal course of the S&P 500 on a daily basis:
S&P 500, detrender seasonal trend, determined over 55 years
The seasonal periods of weakness are clearly visible. Source: Seasonax
As you can see, the S&P 500 falls particularly sharply from mid-September. However, the seasonal weakness tends to begin earlier in mid-July and lasts until the end of October.
The coming weeks could, therefore, be dangerous again on the stock market.
Be careful, don’t ignore the seasonal warning signs!
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Originally Posted September 4, 2024 – The Weakest Month has Begun!
Disclosure: Seasonax
Past results and past seasonal patterns are no indication of future performance, in particular, future market trends. Seasonax GmbH neither recommends nor approves of any particular financial instrument, group of securities, segment of industry, analysis interval or any particular idea, approach, strategy or attitude nor provides consulting nor brokerage nor asset management services. Seasonax GmbH hereby excludes any explicit or implied trading recommendation, in particular, any promise, implication or guarantee that profits are earned and losses excluded, provided, however, that in case of doubt, these terms shall be interpreted in abroad sense. Any information provided by Seasonax GmbH or on this website or any other kind of data media shall not be construed as any kind of guarantee, warranty or representation, in particular as set forth in a prospectus. Any user is solely responsible for the results or the trading strategy that is created, developed or applied. Indicators, trading strategies and functions provided by seasonax GmbH or on this website or any other kind of data media may contain logical or other errors leading to unexpected results, faulty trading signals and/or substantial losses. Seasonax GmbH neither warrants nor guarantees the accuracy, completeness, quality, adequacy or content of the information provided by it or on this website or any other kind of data media. Any user is obligated to comply with any applicable capital market rules of the applicable jurisdiction. All published content and images on this website or any other kind of data media are protected by copyright. Any duplication, processing, distribution or any form of utilisation beyond the scope of copyright law shall require the prior written consent of the author or authors in question. Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results. Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.
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