September Is Usually Ugly For Stocks — Why This Year Is Different

• Since 1990, the S&P 500 has gained an average of 0.93% in September when up 10%+ year-to-date through August 31, with positive returns two-thirds of the time
• Only three of twelve S&P 500 sectors fell in September during years when they were up year-to-date as of August 31, despite three sectors (communication services, healthcare, energy) typically declining in the month
• Top September performers include industrials and materials stocks, with Quanta Services averaging 6.2% gains and Caterpillar up 6.1% historically during the month

Summary: September Stock Market Outlook Defies Historical Weakness

Key Historical Context:

September ranks as the worst performing month for stocks since 1950, with the S&P 500 averaging a 0.8% decline. Portfolio managers typically "clean house" after Labor Day, creating selling pressure.

Why This Year May Be Different:

According to Bespoke Investment Group analysis, September performance improves significantly when markets enter the month with strong year-to-date gains. When the S&P 500 is up 10% or more through August 31, the index has averaged a 0.93% September gain with positive returns two-thirds of the time since 1990.

Current Market Position:

The S&P 500 has returned over 13% year-to-date (including dividends), well above its typical 10% annual return. This has occurred in only 12 previous years, and those instances showed the positive September pattern.

Sector Performance:

While only three sectors (communication services, healthcare, and energy) typically gain in September, most sectors post positive returns when entering the month with year-to-date gains.

Top Performing Stocks:

Historical September winners include industrials and materials stocks:

• Quanta Services (PWR): 6.2% average gain
• Caterpillar (CAT): 6.1% average gain
• TKO Group Holdings (TKO): 4.0% average gain
• Halliburton (HAL): 3.4% average gain

Market Implication:

The article suggests investors should not be deterred by September's historically negative reputation, given the current year's strong performance trajectory makes conditions more favorable than typical September patterns.