Why are September and October historically weak for stocks? For answers, I turned to Mark Higgins, senior vice president at Index Fund Advisors and author of the book,Yes. The most intense panics on Wall Street have tended to occur during the late summer and early autumn months. This can be traced all the way back to the 1800s. A few notable examples of exceptional panics include Black Friday of 1869, the Panic of 1873 and the Panic of 1907.
The inelasticity of the U.S. currency made the late summer and early autumn months an especially precarious time, due to the agricultural financing cycle. In the 1800s, the U.S. economy still relied heavily on agricultural production. For the first eight months of the year, American farmers had a limited need for capital, so excess funds held on deposit in state banks were shipped to New York banks or trust companies to earn a higher rate of return.