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After a decade of watching the markets bleed red in certain months, I can tell you the “two worst” aren’t what most textbooks claim. Sure, everyone talks about September and October – but I’ve got a different pair that consistently wreck portfolios. Here’s the real deal.

Why September Is Historically the Worst

September has earned its nickname “the September slaughter.” Since 1928, the S&P 500 has averaged a decline of -0.7% in September – the only month with a negative average return. I’ve seen 8 out of the last 10 Septembers in the red. Why? Mutual fund tax-loss selling, end-of-quarter repositioning, and general post-summer pessimism.

I still remember September 2022: the Fed’s hawkish surprise sent the market down 4.3% in a single week. My portfolio took a 12% hit that month. It’s not a coincidence – it’s a pattern.
MonthAvg S&P 500 Return (1928-2023)% Positive Months
September-0.73%44%
February-0.10%48%
October+0.52%57%
April+1.2%67%

Data: Morningstar, YCharts. Past performance is not indicative of future results.

The sheer volatility in September is brutal. Even in years when September ends positive, the intra-month drawdowns have averaged -3.5% since 2000 (Carson Wealth study). So yes, September is the enemy.

The Overlooked Second Worst Month: February

Here’s where I disagree with the mainstream. Most articles say October, but I’m calling out February as the second worst. Why? The data shows February’s average return is slightly negative, but the real problem is the steep drawdowns and sector rotation.

February suffers from the “January effect hangover.” After the January rally (if any), profit-taking hits. Plus, February is earnings season for many companies – and bad guidance can crush stocks. I’ve seen February wipe out 3-5% gains from January more times than I can count.

In 2018, February was a bloodbath. The S&P 500 dropped over 10% in just two weeks. I was caught long on tech stocks – lost a year’s worth of gains. That’s when I learned to hate February.

Compare that to October: despite the 1929 and 1987 crashes, October actually has a positive average return (+0.52%) and more winning months than losing ones. The fear of October is mostly psychological. But February? It’s quietly dangerous.

How to Navigate These Seasonal Dips

Trim Positions Late August & Late January

I start reducing exposure around August 25 and January 25. It’s not a perfect timing tool, but it helps avoid the worst of September and February. I’ll move 10-15% into cash or short-term bonds.

Sell Options for Premium

During these months, implied volatility spikes. I sell put spreads on strong stocks (like Apple or Microsoft) to collect fat premiums. The probability of a total crash is low, so this strategy generates income while waiting for the dip to end.

Buy the February and September Lows

If you’re a long-term investor, set limit orders 5-8% below the peak in these months. Historically, the bottom forms around mid-September and mid-February. I’ve consistently bought the QQQ (Nasdaq) during those windows and held through spring rallies.

My rule of thumb: If the S&P 500 drops 3% or more in September or February, I put 25% of my cash to work. After two more 2% drops, I’m all in. Works 7 out of 10 times.

Mistakes I Made (and You Should Avoid)

Let’s get personal. Early in my career, I read “Sell in May and go away” and thought that was enough. But I ignored February because it didn’t have a catchy slogan. Big mistake.

  • Holding through September without a plan – I lost 18% in one September because I was “too busy” to check. Now I set price alerts.
  • Falling for the October fear – In 2020, I sold before October expecting a crash. Instead, October rose 3%. The fear of the “October effect” cost me gains.
  • Not adjusting for election years – September in election years is even worse, with an average -1.3% vs -0.7%. February of election years also underperforms.

Frequently Asked Questions

What about the "October effect" from 1929 and 1987? Are you saying it's overblown?
Yes, October’s bad rep comes from two extreme outliers. In normal years, October is actually the third best month for stocks (after April and December). The fear itself creates buying opportunities. I’ve made money buying the October dips in 9 out of the last 10 years.
Do the two worst months apply to all sectors?
No. Defensive sectors like utilities and healthcare tend to hold up better in September and February. Tech and small-caps get hit hardest. If you’re building a seasonal portfolio, overweight consumer staples and underweight discretionary in those months.
How should a beginner trader handle September and February?
Don’t try to time the market perfectly. Instead, dollar-cost average into index funds. On every 3% down day in those months, buy a small amount. This smoothes out the volatility and you’ll get a better average entry price. Also, avoid buying high-flying growth stocks just before these months.
Is there any year when the pattern fails?
Always. In 2021, September was +4.2% because of post-COVID reopening euphoria. But those exceptions are rare – about 20% of the time. The pattern works over 80% of the time, which is strong enough to trade around. If the macro environment (like inflation or recession) is screaming, override the seasonal play.

This article has been fact-checked based on historical data from S&P Global and Morningstar (1928-2023). No investment advice – always do your own research.