Is September the Cruelest Month for Stock Investors?

The highly regarded 1922 poem “The Waste Land” by T.S. Eliot begins —  “April is the cruelest month, breeding lilacs out of the dead land, mixing memory and desire, stirring dull roots with spring rain.”

What has been the cruelest month for stock investors? While October has a reputation for being a volatile month with some of the worst stock market crashes, there is some strong evidence to suggest that September has been the month that has had the weakest stock index returns over several decades.

Below are four charts that show the average percentage change per month for the 23-year period from 1980 through 2012. September was the month with the worst performance for the S&P 500®, and the near-worst month for both the Russell 2000 and MSCI EAFE (in US$) indexes.  On the other hand, August and September were the two best months for changes in the gold spot prices.

111Month-by-month SPX  RUT  EAFE  Gold

A 2011 piece at MarketWatch noted that —

“… Since 1896, for example, when the Dow Jones Industrial Average DJIA was created, the Dow has lost an average of 1.07% in September. The average gain for all other months is 0.71%. That spread of 1.78 percentage points is statistically significant at the 95% confidence level that statisticians often use to determine if a pattern is most likely genuine. … it was more than 20 years ago that (as far as I can tell) the first academic study appeared in which September’s significantly below-average return was noted. Since that study was completed, the spread between September’s average return and that of all other months has been even wider than it was up until that point.  …”

The percentage changes for the S&P 500 Index the past five Septembers were

  • -9.1%             2008
  • 3.6%              2009
  • 8.8%              2010
  • -7.2%             2011
  • 2.4%              2012


If an investor is concerned about a possible big drop in stock prices over the next month, what can the investor do?  One could sell stock and invest in money market instruments, but there can be tax consequences for investors with appreciated stock, and interest rates for money market investments are quite low.

Listed options can serve as flexible, powerful and efficient tools to hedge portfolios and add income to smooth out returns.  Protective strategies include, collars, long SPX protective puts, and  long VIX calls.


In Septembers over the past 23 years, the average % change for four options based indexes were higher than the average change for the S&P 500 —

  • 8.5%              VIX® – CBOE Volatility Index® (the VIX Index is not directly investable, but futures, options, and ETPs on the forward value of VIX are available)
  • 0.3%              CLL – CBOE S&P 500 95-110 Collar Index
  • 0.1%              PUT – CBOE S&P 500 PutWrite Index
  • -0.2%             BXM – CBOE S&P 500 BuyWrite Index
  • -0.3%             S&P 500 Index (Total Return)

For more information on the CLL, BXM and PUT benchmark indexes, and white papers on use of index options to help navigate challenging markets, please visit

  • Nick Ravo

    What! Where’s the ending from The Hollow Men? No Eliot-referenced stock market story should be without it.