Monthly Patterns in Stock Market Returns: A Century of Data

When it comes to building wealth through equities, understanding when the market tends to move—and when it might struggle—can help investors make more informed decisions. The S&P 500 index, which tracks 500 large-cap U.S. companies representing roughly 80% of the domestic equity market by capitalization, serves as the primary barometer for stock market performance overall. Looking back at the index’s behavior across different months provides valuable lessons about stock market returns throughout the year.

Which Months Deliver the Best Returns?

Contrary to popular belief, not all months are created equal when it comes to stock market returns. Data spanning from January 1928 through December 2023—nearly a century of market activity—reveals clear seasonal patterns. Across this period, the market posted positive returns in nine out of every twelve months historically, making it a profitable venture more often than not.

The summer months typically outperform the conventional wisdom that suggests selling in May and taking the season off. The S&P 500 actually tends to move higher between June and August, with July emerging as historically the single strongest month of the year. This challenges the old market adage and suggests that summer portfolio exits may cost investors money.

September stands out as the exception that proves the rule—it has been the weakest month historically for stock market returns. However, this weakness often creates opportunity. The sharp September decline has typically been followed by sharp rebounds in October and November, reflecting renewed investor enthusiasm as the holiday shopping season approaches. Savvy investors can capitalize on this pattern by maintaining cash reserves to purchase stocks at depressed prices during September’s weakness.

Long-Term Holding Periods Guarantee Profitability

Among the 1,152 months examined from 1928 to 2023, the S&P 500 generated positive returns in approximately 682 months—roughly 59% of the time on a monthly basis. This means short-term monthly returns are only slightly better than a coin flip. However, the picture changes dramatically when investors extend their time horizon.

The probability of earning positive returns rises substantially as holding periods lengthen:

This data, compiled by Bloomberg, Crestmont Research, and Yardeni Research, illustrates a crucial principle: an investor who held an S&P 500 index fund for any consecutive 20-year period since 1928 would have never experienced a loss. That perfect track record of profitability across every rolling 20-year window demonstrates the resilience of long-term stock market returns.

Why Stock Market Returns Favor Patient Investors

Over the past five, ten, and twenty-year periods, the S&P 500 has outperformed virtually every competing asset class according to Morgan Stanley research. This advantage extends across European and Asian equities, emerging market stocks, U.S. and international bonds, precious metals, and real estate investments. The consistency of its outperformance reinforces the case for equity market participation.

The data reveals two critical takeaways: First, monthly timing of the market is largely futile—the odds of picking the right month are barely better than random chance. Second, the longer an investor remains invested, the greater the probability of capturing profitable returns. This combination suggests that time in the market matters far more than timing the market.

For most investors, the practical implication is straightforward: building a portfolio anchored by an S&P 500 index fund, combined with carefully selected individual stocks, creates a powerful wealth-building engine over decades. The historical patterns in stock market returns strongly support a buy-and-hold strategy focused on long-term goals rather than short-term monthly fluctuations.