When Do Stocks Outperform? A Deep Dive Into S&P 500 Stock Performance by Month

Understanding how the market behaves throughout the year can help investors time their strategies more effectively. Stock performance by month reveals interesting patterns that have persisted for nearly a century. The S&P 500, which represents 500 of America’s largest companies accounting for 80% of domestic equities by market capitalization, provides an ideal lens for examining these seasonal trends. By analyzing historical data from 1928 through 2023, investors can identify when markets tend to rally and when caution may be warranted.

The Odds of Winning Improve With Time

The relationship between holding period and positive returns is perhaps the most important lesson for long-term investors. Over the 96 years of data analyzed (1,152 total months), the S&P 500 generated positive returns just 59% of the time on a monthly basis—barely better than a coin toss. However, this picture changes dramatically as investment horizons expand.

The probability of capturing gains accelerates with longer timeframes:

• 1-month holding period: 59% chance of positive returns
• 1-year holding period: 69% chance of positive returns
• 5-year holding period: 79% chance of positive returns
• 10-year holding period: 88% chance of positive returns
• 20-year holding period: 100% chance of positive returns

Remarkably, every rolling 20-year period since 1928 has delivered positive returns. This historical fact underscores a fundamental principle: patience in equity investing has always been rewarded. Investors who remained committed to an S&P 500 index fund for at least two decades never experienced a loss, regardless of when they started or which major financial crises occurred during their holding period.

Which Months Deliver the Best Stock Performance by Month?

The S&P 500’s monthly behavior reveals compelling patterns. The index has historically posted gains in nine of the twelve months, with only three months showing net declines. This fundamental reality—that markets rise more often than they fall—contradicts the pessimism that sometimes pervades investor sentiment.

One persistent market myth suggests investors “sell in May and go away,” based on the theory that summer months bring weakness before autumn rebounds. Data contradicts this conventional wisdom entirely. The S&P 500 typically rises between June and August, with July historically emerging as the single best-performing month of the entire year for stock investors.

The September Effect Is Real—And Exploitable

September stands apart as the exception to the market’s generally bullish tendencies. The S&P 500 has historically fallen sharply during this month, making it the weakest period in the calendar year. This phenomenon, known as the “September Effect,” has puzzled market observers for decades.

However, the market has typically rebounded abruptly in subsequent months—presumably fueled by anticipation of holiday consumer spending and the renewed optimism that characterizes fall market activity. Savvy investors can exploit this recurring pattern by maintaining dry powder (cash reserves) specifically to purchase stocks when September weakness emerges, positioning themselves to benefit from the autumn recovery.

S&P 500 Crushes Competing Investments Across All Time Horizons

When compared against virtually every other major asset class over the past five, ten, and twenty years, the S&P 500 has delivered superior returns. This dominance extends across:

• European and Asian equities
• Emerging market stocks
• U.S. and international bonds
• Precious metals
• Real estate investments

According to data from Morgan Stanley, no alternative asset class has consistently matched the S&P 500’s risk-adjusted returns over extended periods. This performance advantage reflects not just economic growth but the structural advantages of owning stakes in the world’s most productive companies.

Building Wealth Through Systematic Index Investing

The historical analysis reveals a clear investment thesis: The S&P 500 offers an exceptionally favorable risk-reward profile, particularly for investors with multi-decade time horizons. Over the past three decades alone, the index delivered cumulative returns of 1,710%, averaging 10.1% annually while encompassing multiple economic cycles, recessions, and market dislocations.

For most investors, an S&P 500 index fund represents the core foundation of a wealth-building portfolio. This passive approach provides diversified exposure to America’s largest companies without the expense and risk associated with active stock picking. Even investors who maintain a portfolio of individual stocks should consider index funds as a stable anchor, offsetting the volatility that individual securities inevitably introduce.

The evidence is unambiguous: Time in the market consistently outperforms attempts to time the market, and understanding monthly stock performance by month patterns can help investors maintain discipline during inevitable seasonal downturns and capitalize on recurring opportunities.