September has a reputation, and not a particularly good one. Investors are familiar with market adages such as the “Santa Claus rally” and “sell in May and go away,” but when it comes to historically difficult months, September has long stood out.
The recent numbers help put September’s reputation into perspective. Over the 10 Septembers from 2016 through 2025, the S&P 500 averaged a return of -1.34 per cent, the Nasdaq Composite -1.59 per cent, and Canada’s S&P/TSX Composite -0.14 per cent. Perhaps even more interestingly, all three indices recorded exactly five positive Septembers and five negative Septembers during that period.
That distinction is important. September has not necessarily been negative more often than positive. The declines during the weaker years have simply been large enough to pull the overall averages below zero. It reinforces a useful market observation often attributed to Mark Twain: history doesn’t necessarily repeat itself, but it often rhymes. Seasonal patterns can provide useful context, but they certainly cannot tell us with certainty what will happen this September.
Why does September tend to struggle?
There is no single explanation for September’s historically weaker performance. Summer trading winds down, institutional investors return, and portfolio managers begin positioning for the final quarter of the year. Companies also have better visibility into full-year earnings expectations, giving investors an opportunity to reassess forecasts, valuations and outlooks.
September can therefore become something of a reassessment period. Investors refocus on corporate earnings, economic growth, inflation, interest rates and central bank policy, while portfolio managers may also rebalance positions heading into year-end. When valuations are elevated or economic uncertainty is already present, this renewed scrutiny can sometimes contribute to greater volatility.
There is another factor worth considering this year: 2026 is a U.S. midterm election year. Over the last 10 midterm election years, September has been negative six times and positive four times for the S&P 500, with an average return of approximately -2 per cent. That is somewhat weaker than September’s recent overall record, but a sample of 10 periods is hardly enough to make the calendar a reliable forecasting tool.
The good news is that the historical picture has generally become much more favourable once midterm elections are behind us. Since 1950, the S&P 500 has averaged approximately 14.7 per cent during the 12-month period following a midterm election. One possible explanation is that, as Election Day passes, uncertainty surrounding taxes, regulation, fiscal policy and the balance of power in Washington begins to diminish, allowing investors to refocus on fundamentals.
Seasonality is a guide, not an investment strategy
I often hear a variation of the same question from clients at this time of year: “If September is historically weak, why not simply sell now and buy back in October?” It sounds logical, but investing is rarely that simple. September is still positive often enough that trying to time the month can easily leave an investor on the sidelines during a rally.
Seasonality is one factor. It is not an investment strategy. Economic conditions, corporate earnings, geopolitics and monetary policy can easily overwhelm historical calendar patterns in any given year.
When I assess markets, I look at a much broader set of factors, including earnings growth and revisions, valuations, economic conditions, inflation, interest rates and monetary policy. I also incorporate technical analysis to help assess market trends, momentum and whether price action is confirming the broader investment outlook.
If those signals remain constructive, a historically weak month on the calendar is not enough, on its own, to make me defensive. Conversely, if fundamentals are deteriorating, technical trends are weakening and economic risks are building as we enter a historically more volatile period, then seasonality becomes another useful piece of evidence to consider.
Good investment decisions rarely come from one indicator. They come from assessing multiple factors and weighing the evidence collectively.
Keeping September in perspective
Most importantly, a portfolio should not be managed around a single month. A portfolio exists for a purpose. It may need to fund retirement, generate cash flow, preserve capital, minimize taxes, meet significant financial goals or eventually transfer wealth to the next generation.
That is why market decisions should always be viewed within the context of each client’s broader total wealth plan. September’s historical record is worth understanding, and the midterm election cycle provides another useful point of reference, but neither should be considered in isolation.
The objective remains the same: make disciplined investment decisions based on the weight of the evidence while keeping longer-term financial goals firmly in view.
Seasonality can inform an investment decision. It should never dictate one.
