The September Effect: Historical Underperformance in European Equity Markets

For investors navigating global equity markets, September often presents a distinct challenge, characterized by a historical pattern of underperformance. This phenomenon, widely observed across major indices, suggests that the ninth month of the year frequently deviates from typical market trends, posing a persistent hurdle for portfolio managers and individual traders alike. Understanding the underlying dynamics of this seasonal weakness is crucial for strategic financial planning.

• European equity markets have historically mirrored the “September effect” seen on Wall Street.
• The Euro Stoxx 50 index has recorded an average September loss of 1.56% over the past three decades.
• The broader Euro Stoxx 600 has seen an average loss of 0.96% in September since 2002.
• This weakness is often attributed to lower trading volumes following the summer holiday period.
• Post-summer portfolio rebalancing by institutional investors contributes to market shifts.
• Renewed macroeconomic uncertainty as the year-end approaches further influences market sentiment.

Historical Performance and Underlying Factors in European Markets

Historically, European equity markets have mirrored the “September effect” seen on Wall Street. The Euro Stoxx 50 index, Europe’s leading blue-chip benchmark, has recorded an average September loss of 1.56% over the past three decades, often vying with August as the year’s weakest month. In 15 of those 30 years, the index closed September negatively. The pattern persists in the last decade, with an average 1% drop since 2014 and six out of ten instances ending in losses. Similarly, the broader Euro Stoxx 600 has seen an average loss of 0.96% in September since 2002, aligning with the S&P 500’s average 1% September decline, its worst monthly return.

This pronounced seasonal weakness is often attributed to a confluence of factors: traditionally lower trading volumes following the summer holiday period, post-summer portfolio rebalancing by institutional investors, and renewed macroeconomic uncertainty as the year-end approaches, which collectively influence market sentiment and risk appetite.

National Indices Reflect the Trend

The September effect extends beyond pan-European benchmarks to individual national indices:

• Germany’s DAX index: Averages a -1.62% return in September, its second weakest month, with a winning rate of 47%.
• France’s CAC 40: Registers an average -1.49% decline in September, its poorest month, managing a 53% winning rate.
• Italy’s FTSE MIB index: Averages a flat 0% return long-term in September, but is currently on a streak of four consecutive negative Septembers.

Leading European Stocks Face Consistent September Headwinds

Several prominent European companies consistently demonstrate September underperformance, with this month often marking their weakest average monthly returns and significant historical declines:

• Infineon (Germany): Averages a 6.13% September loss, its historical weakest month, including a 52.34% drop in 2001.
• Vivendi (France): Records an average 4.07% September loss with a 33% winning rate, experiencing a record monthly decline of 66% in 2021.
• Airbus (Netherlands/France): Has fallen in six consecutive Septembers, averaging a 4.01% decline, with a 37.04% plunge in 2001.
• LVMH (France): Europe’s largest luxury group, averages a 3.42% September drop, with its worst September loss at 34.71% in 2001.
• Société Générale (France): The French bank posts an average September return of -3.11%, with its most severe drop of 40.38% in 1998.
• Schneider Electric (France): Averages a -2.16% September return, with its steepest fall of 34.43% in 2001.
• E.ON (Germany): The utility company averages a 2.18% September loss, with a notable drop of 24.03% in 2015.
• Deutsche Post AG (Germany): The logistics group averages a 1.97% loss in September, experiencing a 22.41% decline in 2002.
• Kering (France): A luxury player, averages a 1.76% drop in September and is currently on a four-year losing streak for the month.
• SAP (Germany): Europe’s largest software company, averages a 1.6% September decline; a prior six-year negative streak ended in 2024, but it saw a 40.98% drop in 2002.