With markets closed for Labor Day, today’s briefing takes a step back for a quick market history lesson. If you’ve ever heard traders grumble about September and “fear October,” there's a good reason. Seasonality may not drive markets on its own, but history shows these two months are among the most consequential on the calendar.

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Every calendar has its quirks, and for investors, September is the one month that consistently brings more anxiety than opportunity. Since the late 1920s, September has averaged the weakest returns of any month, a pattern so persistent it has become known simply as the “September Effect.” The reasons are debated, from mutual fund tax-loss selling to post-summer rebalancing, but the track record is striking. In 1931, deep in the Great Depression, U.S. equities cratered nearly 30% in September alone. In 1974, a cocktail of inflation, rising oil prices, and recessionary fears drove a 12% collapse. The pattern showed up again in modern times: following 9/11 in 2001, the S&P 500 shed nearly 12% that September, and in 2008, Lehman’s bankruptcy turned a seasonal weakness into a systemic shock, producing a 9% drop.

If September is known for steady attrition, October is remembered for seismic jolts. The most famous came in 1929 when two brutal days of selling marked the start of the Great Depression. Nearly 60 years later, October 19, 1987, Black Monday, saw the Dow Jones Industrial Average plunge 22% in a single session, the steepest one-day decline in history. More recently, October 2008 became the heart of the global financial crisis, with the S&P 500 losing 17% as the banking system teetered. These episodes cemented October’s reputation as the “crash month.”

Yet history shows October is not only about destruction. It is also a month of renewal. The bear markets of 2002 and 2011 both bottomed in October, setting the stage for multi-year rallies. Even the bruising late-2018 selloff began to reverse in October. Traders sometimes call it the “bear killer,” a month when markets force a reckoning, flush out excesses, and reset.

Looking ahead, it is tempting to assume that seasonal weakness will replay on schedule. Equities are near record highs, inflation data is still in play, and politics have injected fresh uncertainty into central banking. Those factors could amplify the market’s well-documented autumn jitters. But it is equally important to recognize how the structure of markets has changed. In the 1930s or 1970s, information traveled slowly and liquidity was thinner. Today, policymakers react faster, central banks communicate more openly, and diversified global capital flows soften shocks.

That doesn’t mean volatility disappears. September still tends to rattle nerves and October still has a way of forcing hard resets. But the long arc of history suggests that turbulence often clears the way for opportunity. With earnings growth broadly positive, AI-driven capex reshaping the economy, and the Fed already leaning toward easing, the current backdrop looks less like a prelude to collapse and more like a reminder that markets climb walls of worry.

We’ll see you back here tomorrow for our regularly scheduled programming. The week ahead stands to provide plenty to keep an eye on, with earnings from Broadcom (AVGO) and Salesforce (CRM), and a big batch of ISM and employment data, culminating in Non-Farm Payrolls Friday morning. Have a wonderful Labor Day!