The Nasdaq Has Fallen in 48% of Septembers Since 1971. Here's What That Means for Nvidia and Micron.
Key PointsWhile the Nasdaq rises more than 50% of the time in September, its long-run average return is negative.
The Nasdaq has fallen in 48% of September months since 1971, according to market data. This phenomenon, known as the September Effect, reveals a persistent pattern of weaker returns in the month of September compared to any other month. Institutional investors, mutual funds, and individual traders view September as a period of heightened risk, causing a self-reinforcing cycle of caution and decision-making.
Upon returning from summer vacations, portfolio managers reassess their positions, often trimming winners or offloading underperforming assets ahead of the fiscal year's end in September or October. Additionally, some funds operate on fiscal years that culminate in September or October, providing a limited window for tax-loss harvesting.
The interplay of lower liquidity, renewed scrutiny of valuations, and a psychological shift from summer complacency to autumn caution historically results in a decline in the Nasdaq. Despite often finishing higher, the Nasdaq has experienced a decline in 48% of September months since 1971. The September Effect holds implications for companies like Nvidia and Micron, as the market sentiment during this period could impact their stock performance.
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