Why September’s Curse Might Be Cracking
September is back, and with it comes the usual market superstition: historically, this is the worst month of the year for U.S. stocks. You’ll hear it everywhere from trading desks to TikTok that September spells doom for equities. But this time, the script may not be so rigid.
After a red-hot August, led by a surprising surge in small caps and cooling inflation data, we’re entering September with the S&P 500 holding strong above its 200-day moving average, a technical signpost that tends to alter the seasonal narrative. In short, when markets come into September with momentum, they tend to leave September in better shape too.
Add in an anticipated Fed rate cut, mixed signals from the labor market, and still-low volatility (hello, VIX), and we’re suddenly dealing with a setup that looks less like seasonal weakness and more like an inflection point. The question is whether investors get the “soft landing” they’re hoping for or if a storm cloud is hiding behind this calm.
In this edition of The Market Pulse, we’re diving into why this September might defy the data. You’ll also discover what moving averages actually tell us in This Week I Learned, get a dose of trading humor in The Fun Corner, and leave with one clear takeaway in The Last Say.
Let’s get to it.
This Week I Learned…
The Moving Average Myth and the Math Behind Market Mood
You’ve probably heard the term “200-day moving average” tossed around like gospel on Wall Street, especially when predicting market momentum. But what does it really mean, and why does it matter more in some months like, say, September?
This week I learned that the S&P 500’s position relative to its 200-day moving average is a lot more than just a technical trivia point. When the index is above its 200-day moving average heading into September, the odds shift drastically. The market has posted an average gain of 1.3% and ended the month higher 60% of the time since 1950.
But when it’s below, that average return plummets to minus 4.2% with a dismal 15% win rate.
This isn’t just some random seasonal quirk. It reflects investor confidence, institutional strategy, and long-term capital positioning. Big funds tend to align their bets with the trend, and the 200-day line acts like a psychological border between bullish conviction and caution.
So yes, seasonal trends still exist, but their predictive power hinges on where the market is when it enters the month. Context, as always, is everything.
The Fun Corner
Why September Traders Carry Umbrellas
Want to guess what September and stop-loss orders have in common?
They’re both used in case of sudden storms.
Since 1928, the S&P 500 has posted positive returns in September less than 45% of the time. That’s worse than flipping a coin. No wonder traders treat the month like a cautious camping trip — gear up, expect rain, and hope for sunshine.
But here’s a fun stat. When the market enters September with momentum, meaning it’s above the 200-day moving average, returns not only improve, they flip entirely to become statistically positive.
So maybe the moral isn’t to fear September. It’s to fear not knowing what condition the market is in when it gets here.
September Scare or Setup? Why This Year Might Break the Pattern
Investors treat September like the haunted house of the calendar, and for good reason. Historical data shows the Dow, S&P 500, and Nasdaq all perform poorly on average during this month. Since 1897, the Dow has declined an average of 1.1% in September, while the S&P and Nasdaq have performed only slightly better or worse, depending on the benchmark.
However, this time, things may not unfold as expected.
For one, U.S. equities came into September riding high. August posted impressive gains across the board. The Dow rose 3.2%, the S&P 500 gained 1.9%, and the Nasdaq added 1.6%. Small-cap stocks even saw their best August in 25 years. Historically, when markets are already trending upward going into September, that infamous seasonal weakness tends to fade.
More importantly, the S&P 500 is currently sitting well above its 200-day moving average, a key threshold that, when crossed to the upside, changes both institutional behavior and technical expectations. Since 1950, years when the S&P is above that line in early September have seen average gains for the month, not losses.
Layer on top of that a likely interest rate cut from the Federal Reserve, expected at the upcoming September 16–17 meeting, and you’ve got a macro backdrop that looks more promising than previous years. Inflation pressures have cooled, the labor market is showing signs of slowing in a good way, and the VIX is sitting at its lowest point this year.
Of course, that last point might also be a red flag. A low VIX often precedes a spike in volatility, particularly as we approach the fall. That’s why many analysts are calling this “the calm before the storm.”
But if there’s a year when September might flip the script, this could be it.
The Last Say
The Calm, The Storm, and the Setup Ahead
September is supposed to bring chaos. But what if it’s setting the stage for something better?
This week’s newsletter took us through the data, highlighting how, historically, this month is the weakest on the calendar. However, under specific market conditions, it has the potential to perform just fine. The key signal is momentum into the month, and right now, the market has it.
With the S&P 500 solidly above its 200-day moving average and investor optimism driven by anticipated Fed easing, the traditional September slump might stay on the sidelines. That said, volatility always lurks nearby, especially when the VIX is sitting low and macroeconomic uncertainty remains high.
We’re walking into September with both optimism and caution. The coming weeks will bring a crucial jobs report and a Fed decision, both of which could quickly change the market narrative. But until then, the numbers say we’re in better shape than the calendar would have you believe.
We’ll leave you with this. Patterns matter, but conditions matter more. Let the history books guide you, but let the charts and fundamentals lead.
