September is said to be a traditionally losing month for equities, but does it deserve its reputation? CNBC has been crunching the numbers behind the so-called "September effect."

Wall Street

Historical analysis indicates that September has traditionally been a difficult month for stock markets, with data from the S&P 500 showing a higher likelihood of negative returns compared to other months. For example, since 1929, September has more often resulted in losses for investors, and this trend is reflected in the current month's early performance.

Despite this pattern, there are exceptions. The MSCI World Index, for instance, has sometimes posted gains in September, particularly when August was also positive. Looking ahead, upcoming events such as the Federal Reserve's interest rate decision could influence market movements, although past performance does not guarantee future results.

Is September really bad for stocks? Here's what the data says

Now, autumn is upon us, but the leaves may not be the only thing turning red this month. Data crunched by CNBC shows that September has traditionally been a losing one for stocks. And that's been playing out in the first week, where the Stocks100 index is down just over 0.6% for the month so far. But of course, it is early days. Let's see what will happen throughout the rest of the couple, the rest of the incoming weeks. In the meantime, our very own Ganesh has been looking at the numbers. Ganesh, just explain to us, really, we know that there's this, to some extent, narrative that September tends to be weak for stocks. What is the data backing that and what are the reasons ultimately behind this week performance? I must say, September appears to be living up to its reputation, if this week is anything to go by, really. A lot of investors are across what is known as the September effect. It's where September has just generally been bad for investors. I dug into the numbers just to see if it's actually reflected in the data. For the S&P 500, for instance, if you looked at returns for September, on average, since 1929, it's just been generally a loser. Every other month of the year, typically, stocks rise. Now, if you model it closer to what has transpired this year, for instance, take the stock 600, for example. August was a positive month. What happens to September generally after that is 66% of the time, it's been a month of negative returns. That's very bad for stock markets, at least for investors. The S&P 500, too, it follows a very similar trend. 55% of the time, it's been a negative month in September. And we've got a chart here that shows returns for every September since the 1930s. Now, if you have a look at that, you'll see that the bars are longer on the negative side, and there's simply just more of them. That's really, really bad for September. I do have some positive news to end on, though. There is an index, the MSCI World Index, and you can access it through the URTH ETF. That bucks the trend. Historically, it has had higher odds of September rising if August has also been a positive month. That's what worked out this year. OK, so you're giving us a little bit of positive news there. But ultimately, if you're an investor, yes, you might think about the historical context. But ultimately, that doesn't matter too much. You want to know what is going to happen next. It's the future looking, ultimately. So are any catalysts really that could have perhaps changed the dynamics and the narrative for the month of September this year? Yeah, for sure. So obviously, you know, historical data doesn't mean future returns are guaranteed. But in less than two weeks time, you've got the Federal Reserve meeting for deciding on interest rates, right? At the moment, the market believes a rate cut is a slam dunk. Now, the commentary that usually accompanies that decision sort of impacts stocks a lot. If the Fed, for instance, cut rates because they just believe interest rates are far higher than where they need to be, maybe stocks might rise. But if they cut rates because the economy is slowing down, I suspect investors might take that as bad news. So, you know, there is a chance that there is something that will happen later this month that might move markets in one way or the other. Well, let's see what's going to happen. It's certainly early days. And of course, we'll be here to report on all of it. In the meantime, if you would like to see more detail on how this historical performance has panned out in the month of September, make sure you check out Ganesh's piece on CNBC.com.

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