September is notorious on Wall Street. Often compared to a dreaded Monday morning, it has historically been the weakest month for US stocks – and history suggests investors should brace for volatility this month.
After a strong August rally that pushed the S&P 500 and Dow Jones to fresh record highs, market watchers are now turning their attention to September’s challenging track record, mixed macro signals, and heightened policy uncertainty.
Markets Ride High Before the September Test
August was a strong month for the US stock market, giving investors plenty to cheer about. The S&P 500 surged past the 6,500 mark to hit a fresh record high, bringing its year-to-date gains to 9.8 per cent and marking a 30 per cent rally since its April 8 low. The Dow Jones also touched new peaks.
But this optimism now faces a major test as September begins. Historically, the Dow, S&P 500, and Nasdaq Composite all tend to post their weakest monthly returns during September.
S&P 500’s Track Record in September
The last decade shows September has mostly been a rough month for the S&P 500, with six negative closes in ten years. The index dropped 2.6 per cent in 2015, slipped a marginal 0.12 per cent in 2016, and then posted gains of 1.93 per cent in 2017 and 0.43 per cent in 2018. Another positive year came in 2019 with a 1.7 per cent rise.
However, the trend turned sharply negative thereafter. September 2020 saw a steep 3.9 per cent fall, followed by an even deeper 4.7 per cent drop in 2021. In 2022, the index recorded its worst September of the decade with a staggering 9.3 per cent decline, before shedding another 4.87 per cent in 2023. Encouragingly, September 2024 broke the losing streak with a 2 per cent gain, raising hopes that this year may signal a turnaround.
Negative Cues for September 2025
To start with, the US labour market data remains a key flashpoint after July’s jobs numbers prompted President Trump to dismiss the Bureau of Labour Statistics chief. The upcoming August reading, due September 5, along with the Fed’s September 16-17 meeting, will be closely watched.
Federal Reserve Chair Jerome Powell hinted at a potential rate cut in his Jackson Hole address but also warned about persistent inflationary pressures. Markets currently price in an 85 per cent chance of a rate cut, but rising political tensions have raised questions about the Fed’s independence and its ability to maintain price stability.
On the international front, French Prime Minister Francois Bayrou faces a September 8 confidence vote over contentious budget cuts, a development that could roil European equities and drive French bond yields higher, which are already near decade highs. Meanwhile, Brent crude oil prices remain volatile as Russia and Ukraine escalate strikes on energy infrastructure. Adding to the global uncertainty, President Trump has imposed a punitive 25 per cent tariff on Indian imports due to its purchases of Russian oil, on top of an earlier 25 per cent tariff on various goods – a move that could weigh on global trade sentiment.
Overall, September has long been a month that tests investor resolve, and 2024 is shaping up to be no different. While the S&P 500’s positive performance this year offers some optimism, lingering macroeconomic concerns, central bank decisions, and geopolitical tensions could quickly sour sentiment.
Market participants will need to stay nimble, balancing the optimism of a strong year-to-date rally with the reality of September’s historical headwinds.