U.S. equity markets kicked off September with historic weakness, delivering the worst first week for the S&P 500 since 1953, according to data from Bespoke Investment Group.
“Since the modern five-day trading week was implemented in 1953, this year’s first week of September marks the worst on record for the S&P 500,” the firm said in a note Monday. According to FactSet, the index declined 4.25% in the opening week of the month.
Only Four Times in History
Bespoke highlighted that the S&P 500 has only fallen more than 2.5% in the first week of September four times in history—in 2001, 1987, 2008, and 2015. These years all correspond with significant market turbulence or major macroeconomic events.
On Friday, U.S. stocks dropped sharply after a weaker-than-expected jobs report. The S&P 500 and Dow Jones Industrial Average both posted their largest weekly losses since March 2023 in a shortened trading week due to Labor Day. The selloff also ended a three-week winning streak for both indices.
What History Says About the Rest of September
Bespoke’s analysis suggests that when the S&P 500 drops at least 2.5% in the first week of September, the rest of the month tends to perform poorly. In three out of the four such years, the index continued to decline; only once did it recover.
Looking beyond September, historical data shows that since 1953, the median gain for the remainder of the year (from around September 7 to year-end) has been +4.16%, with a 76% probability of positive returns.
However, in years where the first week of September saw a drop of more than 2.5%, results were more mixed: two up, two down, with declines averaging four times larger than gains.
Notably:
• In 1987, the S&P 500 fell around 22% by year-end.
• In 2008, losses exceeded 27%, as the collapse of Lehman Brothers triggered a global financial crisis.
Market Rebound Starts the New Week
Friday’s selloff brought the S&P 500’s year-to-date gain down to 13.4%, and left the index 4.6% below its all-time closing high set on July 16.
On Monday, U.S. markets opened higher, staging a modest rebound. As of late Monday morning:
• S&P 500 was up 0.6%
• Dow Jones up 0.9%
• Nasdaq Composite up 0.5%
Bespoke noted the morning rally lacked a clear catalyst, with little significant economic data released. While the New York Fed’s consumer expectations survey has drawn attention in recent months, its market impact may be waning as the Fed shifts focus from inflation to employment.
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