October has a reputation as being a tough month for stocks, but September has often been the real culprit. Since 1950, it has, on average, been the worst month of the year for equities. Looking at the years 1980-2019, September is one of just two months that have seen negative returns, declining -0.70% on average for the period.

This September again fell in line with historical trends as the S&P 500 lost -4.0% during the period, while the Nasdaq fell about 5%. The damage started early. On the second day of the month the S&P took a tumble, retreating more than -3.5% from its record high, the biggest drop since early June. Tech stocks were particularly hard hit, and led the market down with Apple, Microsoft, Amazon, and Facebook all in retreat.

Underlying this was investor concerns about the economy, the ongoing impact of the coronavirus, and the diminished prospects for additional fiscal stimulus. Valuations appeared stretched on the back of a rally that had seen a 60% rise in the S&P 500 off the March lows, while the Nasdaq began September up more than 73% off its low for the year.


There was some good news to be found, especially in housing where confidence among homebuilders remained at a record high.

There was some good news to be found, especially in housing where confidence among homebuilders remained at a record high. The job market continued to show signs of a slow recovery – but the operative word was slow, with new claims remaining at an elevated level in excess of 800,000. The August unemployment rate fell to 8.4% from 10.2% as the economy added 1.4 million jobs.

The volatility continued into the second week of the month, with tech remaining in focus. On September 8th the Nasdaq fell more than 4%, the third consecutive day of declines, and entered correction territory – down more than 10%. Just days before, it had rallied to a new high, making this the fastest ever roundtrip from record to correction.

At mid-month, the U.S. Federal Reserve weighed in, signaling its intent to keep interest rates near zero for the foreseeable future, an extraordinary statement, but we remain in extraordinary times. It set an inflation target of 2% or slightly better and vowed to support a return to “maximum employment.” Fed Chairman Powell indicated that more fiscal stimulus would be welcome, but none appeared to be forthcoming as Congress continued to argue over the shape and scope of any new relief package.

In the meantime, investors continued to be whipsawed by markets that seemed to swing wildly down one day then up the next. While electric car maker Tesla is something of an extreme example, it did manage to capture the zeitgeist, falling nearly 20% one day only to rebound by about 7% the next. Renewed tensions with China, and the on-again/off-again negotiations over the sale of the U.S. arm of the Chinese-owned social media platform TikTok helped further stoke the volatility.

Headed into the end of the month, it was not a pretty picture. Stocks had posted their longest weekly slide since 2019 and the S&P 500 was flirting with correction territory. September closed out in a fitting fashion, rallying on the heels of a raucous presidential debate to cut the losses for the month. Nonetheless, there was some damage done, especially in the high-flying tech sector. Apple, Facebook and Google parent Alphabet each ended the month down more than -10% while Microsoft fell -6.74% and Amazon dropped -8.76%.

The end of the month also marked the close of the third quarter and from that perspective the news was more upbeat. The S&P 500 finished the three-month period up 8.7%, its third-best quarter since 2010. The Nasdaq was up 11%, also its best third quarter in a decade.

In an election year, the “October surprise” is by this point eagerly anticipated. After a September that was full of surprises, one hesitates to even try and guess what might be in store as the new month unfolds.

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Nasdaq is used to refer to the Nasdaq Composite, an index of more than 3,000 stocks listed on the Nasdaq exchange The Nasdaq Composite contains all of the companies that trade on the Nasdaq. Most are technology and internet-related, but there are financial, consumer, biotech, and industrial companies as well.

The S&P 500® Index is widely regarded as the standard index for measuring large-cap U.S. stock market performance.

Zeitgeist is borrowed from German and literally translates to “time spirit” or “spirit of the times.”

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