Sell in September? Why the numbers say this year could be different

It's been a scorching start to September temperature-wise across much of Australia, but unfortunately that hasn't yet translated to the Australian stock market. 

Perhaps that's no surprise, given September is famously the worst month of the year for the ASX 200 from a performance perspective. Forget sunny weather; for the ASX, no month is more likely to rain on the parade than September. 

And the evidence is irrefutable that September has long been the worst month in terms of performance. 

The first month of Spring has averaged a 0.65% drop over the last 25 years. It's also the only month of the year that finishes positive less than 50% of the time.

In fact, September is such an outlier in terms of performance that there's almost certainly a reason for it. But that's a discussion for another day. 

What's interesting is that the exact same phenomenon can be seen in other markets, most notably the US. 

As Carson Group's Ryan Detrick wrote recently, "September is, historically, the worst month of the year for the S&P 500, down 0.6% on average and higher only 45% of the time. Both are the lowest out of all 12 months."

"Not only is September the worst month since 1950, but it’s also the worst month over the past 10 years, [and] the worst month over the past 20 years."

Interestingly, Carson's research found a good August, like we had this year for the S&P 500, augured well for a solid September and strong rest of the year. The best Septembers for the S&P 500 also mostly came in years where year-to-date performance had been good.

The inverse was also true, with 9 of the 10 worst Septembers on record coming in years where the S&P was markedly down year-to-date. 

As Detrick wrote, "the trend is your friend". A good August and a good year so far are good signs that September would also turn out well. 

Applying the same approach to the ASX 200 gives a much muddier picture. 

It's worth prefacing this with the usual qualifiers. There's ultimately very little to be learned from extrapolating historical data, even if the US example shows something of a correlation between good Septembers and good YTD performance. 

On the ASX, there have only been five years since 2006 in which a positive August was followed by a positive September for the ASX 200 (2024, 2013, 2012, 2009, 2006). 

When August was a negative month, September was an even split, with four positive years (2019, 2016, 2010, 2007) and four negative years (2023, 2015, 2011, 2008)

And the same applies when you apply a year-to-date lens.

Since 2006, there have been seven years in which positive year-to-date performance to 31 August was followed by a positive September. There were eight years in which a positive year-to-date translated into a negative September, five in which both were negative, and a solitary year (2010) in which September ended positive despite a negative year-to-date performance. 

So what does the data say about September's prospects in a year like this one, in which we've had a positive year-to-date and a positive August? 

By my count that has happened 11 times in the last 20 years, in 2025, 2024, 2021, 2018, 2017, 2014, 2013, 2012, 2009, 2007, and 2006. 

Six of those years saw a positive September, with five seeing a negative one, for an average return of 0.995% - much better than the regular average return of -0.65%. 

It seems that, just like the S&P 500, the ASX 200 fares much better in September if it's riding the momentum of a solid YTD and a solid August. But it's hardly as convincing as the data for the US. There's probably just as strong a correlation between the ASX's performance in September and the weather. 

Of course, this is a September unfolding after an August reporting season that saw more volatility than ever, with 16% more misses than beats and more than double the number of broker downgrades to broker upgrades (82 to 34).

It's also a September that's unfolding against the backdrop of a huge government debt crisis, a potential Australian property market crash, rising interest rates and more.

Any of those could derail the modest momentum the ASX is currently enjoying. 

It's been an unseasonably hot start to Spring weather-wise; maybe that suggests we could be in for a similar September on the stock market. 

Based on the data, there's some slight reason for optimism. Even if that doesn't prove to be the case, at least the weather is nice.