Historically, September is often cited as the worst month for stocks, showing the weakest average returns for major indices like the S&P 500, followed by August; this phenomenon, known as the "September Effect," is linked to portfolio rebalancing, fiscal year-ends for funds, and increased volatility. While September sees significant selling pressure, October is often the most volatile, and some analysts suggest these historical trends are more due to data quirks or specific crises (like 1929/2008) rather than a guaranteed future outcome, notes Fisher Investments and Investopedia.
The bar chart shows monthly average performance from January 1970 through July 2025 for four equity indexes: the S&P 500 (U.S.), S&P/TSX (Canada), FTSE All-Share (UK), and Hang Seng (Hong Kong). December and January are historically the best months, and September is historically the worst month.
Historically, September is the worst month for the stock market, showing the weakest average returns, a phenomenon known as the "September Effect," with other weak months sometimes being February and May, though September's underperformance is significantly more pronounced. However, past performance isn't a guarantee, and some view these dips as buying opportunities, especially since strong periods often follow, notes SoFi and Wealthfront.
While October is famous for major crashes like Black Monday (1987) and the 1929 crash, September is statistically the weakest month on average for U.S. stocks, showing the worst average returns over long historical periods, often linked to lower summer liquidity and investor behavior shifts after vacations. However, most major U.S. market crises tend to occur between August and October, a period of thinner trading volume that amplifies shocks, according to Fortune.
Historically, November, April, and July are often cited as the strongest months for stock market performance, while September and February tend to be weaker, though December shows the highest frequency of growth and the period from November to April is considered the best rolling 6-month stretch, with patterns varying year-to-year and past performance not guaranteeing future results.
The 3-5-7 rule in stock trading is a risk management strategy: risk no more than 3% of capital on a single trade, keep total open position risk under 5%, and aim for a minimum 7% profit target or 7:1 reward-to-risk ratio, ensuring capital preservation and disciplined growth by setting clear limits and avoiding emotional decisions.
The "90-90-90 rule" in trading is a harsh reality check stating that 90% of new traders lose 90% of their money within the first 90 days, highlighting the high failure rate due to emotional decisions, poor risk management, and lack of education/strategy. It serves as a cautionary tale, emphasizing that success requires discipline, a solid trading plan, continuous learning, and strict risk control (like risking only 1-2% per trade) to avoid the common pitfalls that wipe out most beginners.
Traders often begin their tax-loss selling in September so their portfolios are correctly positioned moving into year-end. An increase in selling by portfolio managers can put a lot of pressure on the market.
Avoid trading during low volume or uncertain news zones. - Stock Screening Results & Outstanding Return Portfolio. Avoid trading during low volume or uncertain news zones.
October Crashes
According to research from LPL Financial, there are more 1% or larger swings in October in the S&P 500 than in any other month in history, dating back to 1950.
The "10 a.m. rule" in stock trading is a guideline suggesting traders wait until 10 a.m. (30 minutes after the market opens at 9:30 a.m. ET) to make significant trades, allowing the initial high volatility and price discovery from overnight news to settle, revealing a clearer market direction for the day. This strategy aims to avoid panic-driven decisions in the chaotic opening minutes, leading to potentially better, more informed trades after the market stabilizes.
The January Effect is known to be a seasonal increase in stock prices throughout the month of January. The increase in demand for stocks is often preceded by a decrease in price during the month of December, often due to tax-loss harvesting.
Calendar months were ranked by volatility of the S&P 500, for every year from 1928 to 2014. The chart shows the mean rank for each month. October and December have the highest and lowest volatilities respectively. October has clearly been more volatile than other months, and December has been less volatile.
S&P 500 Seasonal Patterns
While industry insiders are generally cautious, few expect a crash. Morgan Stanley notes “continued equity gains in 2026” with modest growth, as a lot of good news is already priced in. Fidelity's 2026 outlook is that it “could be another positive year” for the market — but investors shouldn't ignore risks.
Some have interpreted this to mean investing 70% of a portfolio in stocks and 30% in bonds, although work-outs seem to suggest special situations, which differ from bonds. Either way, Buffett has given different investment advice to investors based on their experience.
“You're looking for three things, generally, in a person,” says Buffett. “Intelligence, energy, and integrity. And if they don't have the last one, don't even bother with the first two.