The S&P 500 Fell in Both September and October for Only the 17th Time Since 1950. Here's What Usually Followed.

In the span of 76 years since 1950, the S&P 500 index fell in both September and October only 16 times, making up roughly one out of every five years. Historically, the index has climbed over November and December in 12 out of these 16 instances, resulting in an average gain of approximately 3.7% over the following two months. Conversely, four years did not see a rise during this period - 1957, 1987, 2000, and 2008.

Generally, within a year after the drop in October, the S&P 500 was higher in 14 of the 16 years, with an average increase of around 13%. However, two of these gains were minimal at 0.1% and 0.9% respectively. In 1989, the index had already climbed 23% year-to-date through October, followed by a 12-month decline of around 11%. The data suggests that two consecutive losing months do not offer much insight into the overall year's performance.

From 1950 to 2025, the index gained over November and December in 59 of the 76 years, with an average rise of about 3.6%. Therefore, two losing months have not significantly indicated the year's end. The 12-month results are slightly more favorable, with 14 out of 16 years showing an increase, compared to 60 out of 75 years from 1950 to 2024.

However, with a small sample size, this difference could be accidental. The starting year also plays a role. Years before 1950, particularly during the Great Depression, had more September-October drops and did worse after. This year's dip was one of the smallest, with a combined 1.4% decline for September and October. After similar minor declines, the index has varied in its performance - climbing 7% in 1951, 14% in 1984, and 21% in 2016, while remaining flat after 1952 and dropping around 11% after 1989.

The most significant recoveries came after more substantial drops. In 1990, 2020, and 2023, the index fell around 6% to 7% over September and October, and then increased by 29% to 41% over the next year. Only two of the 16 earlier years had a record close during September or October, namely 1989 and 2020. The largest gain after October 2020 was recorded, while 1989 led to one of the two losses.

The cyclically adjusted price-to-earnings ratio, indicating the valuation, began October at 41 in 2026, close to the 2000 value of 39 and far from the 10 and 27 of 1984 and 2016 respectively. Overall, the history indicates a gain following a two-month dip, with modest expectations being warranted given the current valuation levels.