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The month of October has a list of memorable down days, leading to the legend it is a bearish moth for the S&P 500.
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However, October also has a number of the largest daily rallies.
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Seasonally, the most bearish month for the S&P 500 is not October, but rather September. Myth Busted.
One of the many things that happened this past week was the calendar changed from September to October, not only marking the beginning of Spooky Season (with all Hallows Eve waiting at the end of the month, though given the continued situation in the United States, every season could be considered Spooky Season) but also the end of the financial third quarter (Q3). There are many scary myths surrounding the month of October – The Legend of Sleepy Hollow anyone? – including it is a bearish month for the S&P 500 (($INX).
Like most myths, this one is seeded by scary stories. I asked Barchart’s AI analyst CARL for a list of largest daily moves, and on the downside we have days remember by titles:
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Black Monday, October 19, 1987 (a special time for me)
- With the highlight being “computerized program trading cascade
- A precursor to Watson running amok these days
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Black Monday, this one from October 28, 1929)
- “Margin call liquidations; start of the Great Crash (a dual nickname October day)
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Black Tuesday, from October 29, 1929, the day after the Black Monday (obviously before Turnaround Tuesday was a thing)
- “Panic selling with record volume”
Looking at the Top 10 list of largest losses we see October filling 5 of the spots, with a clean sweep of the podium disrupted by March 16, 2020 – the COVID-19 pandemic panic (“emergency Fed rate cut to zero backfired”; something the current US president (who happened to also hold the title in March 2020) should pay attention to). Given this, it seems a lock the most bearish month for the S&P 500, from a seasonal analysis point of view, is October, right? In the words of legendary US college football talker (another big part of October in the US, while the rest of the world shakes its head in befuddlement) Lee Corso, “Not so fast my friend”.
I also asked CARL for the 10 days with largest gains, and the list came back with 4 dates in October:
- October 30, 1929 (“Post-Black Tuesday relieve rally; Rockefeller buying stocks”; that had to be a a fun week)
- October 13, 2008 (“Global coordinated central bank intervention during the Great Financial Crisis”)
- October 28, 2008 (“Bargain hunting after historic selloffs and rate cut expectations”)
- October 21, 1987 (“Post-Black Monday bargain hunting and liquidity injections”; I remember it well)
At this point, the myth of October not only being the most bearish month for the S&P 500, but a bearish month in general had moved from seemingly being Confirmed to simply Plausible (any old MythBusters fans in the audience?). I then asked CARL directly, “What is the most bearish month seasonally for the S&P 500?”. Just as it did in our previous discussion (on Grains), CARL turned to being helpful by way of sarcasm, “You can easily visualize these trends yourself using cmdtyView’s built-in Seasonal Chart feature”, then showed me how to do it. In other words, CARL had grown bored with my simple questions.
As it turns out, from a seasonal analysis point of view, October is NOT the most bearish month of the year for the S&P, meaning another myth Busted. CARL’s full reply read like this:
- Historically, September is the most bearish month of the year for the S&P 500.
- The seasonal weakness is so well-documented in financial markets that it is commonly referred to as the “September Effect”
Maybe October came in a close second? Nope. According to CARL, “August is historically the second-weakest month, averaging a slight decline of about -0.1% to -0.2%. (For the record, September shows an average return of -0.9%.).
To CARL’s astonishment (maybe), I had already created a Seasonal Chart on cmdtyView looking at this year’s market compared to 5-year, 10-year, 15-year, and 20-year averaeges and it did indeed show a moderate selloff from mid-August through the end of September. From early October through the end of December the S&P 500 tends to post a solid rally.
More to irritate CARL than anything else, I asked a last question, “What is the most bullish monthly seasonally for the S&P 500?” I could almost hear the program sigh (I have that effect on people, and obviously algorithms) before answering. “Historically December is the most bullish month of the year for the S&P 500, closely followed by April and November. His final point discussed another well-known market legend:
- The “Santa Claus Rally”: This historical strength is heavily driven by a phenomenon known as the “Santa Claus Rally” – a tendency for the stock market to rise during the last five trading days of December and the first two trading days of January.
- What CARL didn’t say was there is also a legend of a Santa Claus Selloff from mid-December through just before the holiday. The way I’ve always heard it explained is investors cash in some annual profits to afford Christmas gifts for friends and family. For the record CARL, we can see this on the Seasonal Chart as well.
So, now we know. October should not be viewed as spooky for the S&P, from a seasonal point of view. But before I go I want to remind folks seasonal analysis should be used as a tool to manage risk, not taken as an absolute. Contra-seasonal moves do happen, usually indicating a change from ‘normal’ in underlying fundamentals. As we look ahead at the last quarter of 2026 (Oct-Nov-Dec), there is ample opportunity for a change in dynamics including US Treasury yields continuing to climb to multidecade highs and another rate 25-basis point rate hike by the US Federal Open Market Committee likely in December.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
