What is the toughest month for stocks

As an investor, you’ve likely asked yourself, what is the toughest month for stocks? By analyzing the S&P 500, the most widely followed U.S. stock market index, we can uncover seasonal patterns and identify the months that have historically shown the most volatility. While stock market performance fluctuates year-round, certain months have consistently delivered lower returns or higher returns, presenting unique challenges for investors.

Understanding which months tend to see higher or lower returns (and volatility) in the S&P 500 can help you understand the markets and anticipate potential downturns & make smarter investment decisions.

In this post, we recreate a chart showing average monthly returns of the S&P 500 since 1928 published in WSJ. And highlight the month that stands out as the toughest for stocks.

Using Yahoo Finance’s data for S&P 500 index (^GSPC) we can see that September is the worst month with lowest returns, -1.2%, on an average.

Using the average monthly returns chart we can also find the best month for stocks and it turns our July is the best month with the average return of 1.7% gain.

One could argue looking at the average return can be misleading as mean values could be driven by outliers. A better way understand the variability in the returns is to visualize all the data instead of a summary data like mean return. Here is a look at the distribution of monthly returns of S&P 500 index data since 1928. It confirms that September is the worst month for stocks.