From CNBC: 2024-09-11 06:55:13

Historically, September and October have been weak months for stocks due to a variety of reasons. Panics on Wall Street have tended to occur during late summer and early autumn, tracing back to the 1800s with notable panics like Black Friday of 1869 and the Panic of 1907.

This trend can be linked to the U.S. financial system’s inelasticity before the Federal Reserve Act of 1913. The agricultural financing cycle created cash shortages in New York City during harvest time, leading to panics if coinciding with financial shocks.

The Federal Reserve Act of 1913 was passed to grant the Fed the power to act as a lender of last resort during financial crises. This more stable system has prevented catastrophic collapses like that of the Panic of 1907 and provided stability to markets since its creation.

Despite the U.S. economy shifting away from agriculture, September and October remain weak months due to the repetitive nature of fall panics becoming a self-fulfilling prophecy. People’s fear of these months leads to behaviors that make panics more likely, perpetuating the cycle.

Read more: Here’s why September and October are historically weak for stocks