Technically, we’re already several trading sessions into September, but the month doesn’t really “start” for markets until after Monday’s US holiday.
I don’t accord much “respect,” if that’s the right word, to seasonals, particularly not where respect manifests as fear in the presence of historically bearish months (or front-running ahead of traditionally bullish calendar stretches).
Fearing a given seasonal smacks of superstition, and I’m with Kant in equating deliverance from superstition with enlightenment. (In my experience, purging superstition’s also a prerequisite for equanimity.)
All of that said, to ignore seasonals entirely in the market context is to pretend there aren’t actual, real explanations for their existence, when in fact there are.
With that in mind, it’s worth reminding ourselves that September’s the cruelest month of the year for stocks.
The simple figure above shows you S&P 500 returns for every September going back nearly a quarter century. With 2024 and 2025 both on the books as “up” Septembers, “we’re due,” so to speak.
As former Goldmanite-turned-Citadel strategist Scott Rubner noted, September’s the only month during which US equities have notched declines more frequently than gains (February’s close).
Specifically, the S&P’s closed lower 55% of the time in September looking back nearly a century. As the figure above shows, the average return over that longer lookback is -1.1%.
The weakness is especially pronounced late in the month. Indeed, the last two weeks of September are historically the worst stretch for US equities of the year.
Some of the contributing factors are well-worn territory. The buyback blackout ahead of Q3 reporting season starts mid-month, for example, partially removing a reliable bid from the largest source of equity demand.
But as Rubner went on to point out, September’s also the weakest month of the year for retail demand, at least on Citadel’s platform.
The figures above give you some context. On Citadel’s data (which is copious, for obvious reasons), September sees “both the lowest proportion of annual retail net notional and the lowest directional skew of any month.”
Insult to injury: Retail investors are less inclined to buy dips in September, as illustrated above, on the right.
So… what? Buy “bargain” bonds? Maybe. But maybe not. Because as it turns out, September’s the worst month for 10-year Treasurys of the year, at least looking back a decade.
As the figure shows, the picture isn’t pretty in October either. “September and October have represented the most seasonally bearish months for 10-year notes,” BMO’s Ian Lyngen and Vail Hartman remarked.
“Though the macro fundamentals are without question in the driver’s seat, the seasonal trends add to the bearish backdrop currently underlying the selling pressure in the long-end of the curve,” they wrote, in the same piece.
Add seasonality to the long list of bearish factors Scott Bessent’s fighting in his belabored attempt to bring down US borrowing costs ahead of the mid-terms.
