September has long carried a notorious reputation on Wall Street as the weakest month of the year for U.S. equities. Advisors know the seasonal script: quiet summer trading gives way to heightened volatility, with indices historically posting lackluster or outright negative returns.
As we enter September 2025, market conditions suggest this cycle may not follow the usual pattern. Strong August gains, the prospect of a Federal Reserve rate cut, and shifting macroeconomic dynamics could alter what advisors and clients typically expect during this period of seasonal weakness.
September’s Track Record: A Month of Headwinds
Historical data paints September in a consistently poor light for investors. The Dow Jones Industrial Average has averaged a 1.1% monthly decline since 1897, ending higher in only 42% of Septembers. The S&P 500 has a similar track record, falling an average of 1.1% in September and posting positive returns just 45% of the time since 1928. Even the Nasdaq Composite, despite its reputation for growth-driven resilience, has averaged a 0.9% decline in September since its inception in 1971, with positive performance only 52% of the time.
For wealth advisors, the lesson has traditionally been to prepare clients for turbulence at the start of autumn. The seasonal weakness tends to be compounded by shifting investor psychology, a return of institutional capital from summer break, and an increase in trading volumes that amplifies volatility. As Adam Turnquist, chief technical strategist at LPL Financial, notes, “The financial markets often shift gears in September, moving away from the quiet summer months marked by low trading volumes and limited volatility, and entering a period historically associated with seasonal weakness and increased market instability.”
But while seasonal trends provide context, they do not dictate outcomes. Market behavior in any given year depends on broader forces—macroeconomic shifts, central bank policy, and corporate earnings—rather than the calendar alone.
When Seasonal Weakness Fades
History also shows that September’s poor reputation softens under certain conditions. When stocks rally into September—particularly when the S&P 500 holds above its 200-day moving average—the month’s performance often improves significantly. Since 1950, when the S&P enters September above its 200-day moving average, it has posted an average 1.3% gain for the month, with positive returns occurring 60% of the time. By contrast, when the index sits below that long-term trendline, September has averaged a steep 4.2% decline and only managed gains in 15% of instances.
This historical divergence matters now because the S&P 500 remains comfortably above its 200-day moving average. On Friday, the index closed at 6,460.26, well above the 200-day average of 5,957.05. Advisors interpreting market signals can take some reassurance: from a technical standpoint, the long-term trend remains intact.
The strength of August reinforces this outlook. The Dow climbed 3.2%, marking its best August since 2020. The S&P 500 gained 1.9%, while the Nasdaq rose 1.6%. Small caps delivered the standout performance, with the Russell 2000 surging 7%—its best August in 25 years. These broad-based gains suggest September may not follow its historical script, especially given the supportive macro backdrop investors anticipate.
Macro Forces in Play: Jobs, Inflation, and the Fed
While seasonality often dominates headlines, this September is defined more by the Federal Reserve and incoming economic data than by calendar effects. The Fed’s September 16–17 meeting is widely expected to deliver the first rate cut of this cycle, lowering the federal funds target range by 25 basis points to 4%–4.25%.
For advisors, the nuance lies not in whether the Fed cuts rates, but in how it communicates the policy shift. A “dovish” cut, signaling a willingness to continue easing, could fuel further equity gains and risk-taking. A “hawkish” cut, paired with cautionary commentary on inflation or growth, may temper market enthusiasm. The August jobs report, due next week, will heavily influence the Fed’s tone. Evidence of accelerating labor market weakness would support a dovish stance, while persistent wage growth or sticky inflation could force policymakers into a more guarded approach.
July’s personal consumption expenditures (PCE) report—the Fed’s preferred inflation gauge—showed lingering price pressures tied to tariffs, reminding advisors that disinflation is far from guaranteed. Yet inflation overall has eased significantly compared with last year, and softer labor data provides the Fed cover to pivot without undermining credibility.
Turnquist frames the environment as one where “more powerful macroeconomic forces, such as the health of the U.S. economy and corporate America, could ultimately drive future stock performance.” Seasonal weakness, in this view, becomes a secondary factor in a larger narrative dominated by Fed policy and economic momentum.
Valuations and Market Sentiment
Another layer advisors must consider is valuation. Equity markets have already priced in a “soft landing” scenario where the Fed tames inflation without tipping the economy into recession. This optimism has powered recent gains, but it also raises the risk of disappointment. If data surprises to the downside—either through weaker-than-expected job growth or stubborn inflation—the market may reassess current pricing.
Turnquist warns that the market may be “overbought in the short term, as much of the good news seems to be priced in.” Advisors should prepare clients for the possibility of a pullback that reflects this recalibration, even if the longer-term trend remains favorable.
At the same time, sentiment indicators suggest investors may be underestimating potential volatility. The Cboe Volatility Index (VIX), Wall Street’s so-called fear gauge, dropped to its lowest level of the year in August, declining nearly 8%. Historically, the VIX tends to climb in September and October, often peaking in early autumn before moderating into year-end. With the VIX starting from such a low base, Turnquist cautions that “there is upside risk to the VIX,” meaning volatility could resurface more abruptly than investors expect.
Implications for Advisors and Clients
For wealth advisors, the September setup offers both opportunity and risk. Clients accustomed to hearing about September’s “curse” may be surprised by the potential for resilience this year. Advisors can use this moment to emphasize the importance of context—while historical averages provide perspective, current conditions drive actual outcomes.
Portfolio Strategy Considerations:
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Equity Positioning
With the S&P 500 holding above its 200-day moving average, maintaining core equity exposure remains justified. Advisors may consider emphasizing quality—companies with strong balance sheets, durable cash flows, and pricing power—to withstand any short-term volatility. -
Small-Cap Opportunities
The Russell 2000’s 7% surge in August highlights renewed investor interest in small caps. Historically, small caps benefit more directly from lower interest rates and domestic economic growth. If the Fed begins a sustained easing cycle, small caps could continue to outperform. -
Volatility Management
Even if September avoids steep declines, volatility is likely to increase. Advisors may want to review hedging strategies, including options overlays, low-volatility equity funds, or tactical allocations to alternative assets that provide diversification. -
Fixed Income Reallocation
A Fed rate cut opens the door for renewed interest in fixed income. Duration-sensitive bonds could benefit from lower yields, while credit spreads remain relatively tight. Advisors should evaluate whether client portfolios are properly balanced to capture the opportunity in both government and high-quality corporate debt. -
Client Communication
September’s reputation offers a chance to deepen client relationships through education. Advisors can explain why the month often struggles historically, while also highlighting why this year could break the pattern. Proactive communication helps manage expectations and reinforces confidence in long-term strategy.
Looking Beyond September
While much focus centers on the next few weeks, advisors must maintain perspective. If the Fed follows through with easing, the fourth quarter could see a more sustained rally, particularly if corporate earnings stabilize and economic data confirm a soft landing. The final months of the year have historically been favorable for equities, with November and December among the strongest performers in the calendar cycle.
In this sense, September may serve as a transition month rather than a destination. Advisors who help clients weather near-term uncertainty while staying positioned for longer-term growth can capture the benefits of both defensive preparation and opportunistic allocation.
Final Thoughts
September’s track record of underperformance is undeniable. Yet the dynamics shaping today’s market are materially different from historical averages. Strong August performance, a supportive technical backdrop, and the likelihood of a Fed rate cut create conditions that could defy the month’s reputation.
For advisors, the challenge is balancing awareness of seasonal risk with recognition of the evolving macro environment. The opportunity lies in positioning portfolios for resilience, preparing clients for short-term volatility, and maintaining a disciplined focus on long-term objectives.
In other words, this September may not fit the usual narrative. For wealth advisors and their clients, that divergence can be a source of strength—if navigated with foresight and strategy.
