Last Updated on 02/09/2026
Stocks have staged an impressive recovery from their spring lows, largely brushing aside concerns about economic growth, inflation, elevated interest rates, the impact of artificial intelligence (AI), geopolitical risks, and ongoing policy uncertainty. However, as September begins, equities are moving into what has historically been their weakest month of the year from a seasonal perspective.
Why does seasonality matter in the first place? Markets are influenced by several recurring calendar-based factors, including tax-driven selling, mutual fund fiscal year-ends, corporate share buyback periods, reduced summer liquidity, and the regular cadence of earnings seasons. These forces can create patterns that repeat over time. While they are far from reliable forecasts, persistent behavioral trends can provide investors with a useful indication of the market’s typical direction.
September has consistently been a weak period for equities. Since 1950, it has been the only month to post a negative average return for the S&P 500, at approximately -0.6%, while the index has ended September higher less than half of the time. The weakness has been even more evident over the past five and 10 years, reinforcing the case for seasonal caution. Before 1957, the data is based on the predecessor S&P 90 index. Historical performance, however, does not guarantee future results.
It might seem reasonable to expect a midterm election year to provide some relief, but historical data offers little evidence of that. September during midterm years has produced an average return of roughly -0.8%, virtually the same as September in non-election years and broadly in line with the long-term seasonal pattern. In other words, September has generally been a weak month regardless of the political cycle. The most recent midterm September, in 2022, was particularly difficult, with the S&P 500 falling more than 9% as investors worried about aggressive Federal Reserve rate hikes, persistent inflation, rising Treasury yields, and growing recession risks.
The more positive takeaway from the midterm cycle comes after September. Historically, October has been the strongest month for stocks during midterm years, delivering an average return of nearly 3.0%, while November has averaged about 2.7%. Both figures are substantially stronger than their counterparts during non-midterm years. Together, October through December have historically represented the strongest three-month period of the entire four-year presidential cycle.
This seasonal improvement may reflect declining political uncertainty as markets begin to gain greater clarity around the election outlook. The earlier rebound typically seen in October during midterm years, compared with the November recovery often observed during presidential election years, may stem from the narrower range of potential outcomes. Investors can begin pricing in reduced uncertainty before the midterm vote, whereas presidential elections generally carry greater market significance and may encourage investors to wait for the actual result.
Importantly, the historical strength following September in midterm years has not been dependent on which political party controls the White House. Markets have generally reacted more positively to the reduction in uncertainty than to the specific election outcome. Since 1950, stocks have risen during the year following every midterm election—19 consecutive instances—with an average gain of nearly 15%.
That track record is notable, although every market cycle is different and historical patterns are not guarantees. Still, the tendency for equities to strengthen once the midterm elections are behind them is an important factor for investors to consider.
At the same time, seasonal and election-cycle trends should be viewed as historical averages rather than precise forecasts. The relatively small sample of roughly 75 observations since 1950 also means that a single unusually strong or weak year can materially influence the results. Ultimately, stock prices remain driven by corporate earnings, economic conditions, monetary policy, valuations, and investor sentiment.
With the Federal Reserve, economic growth, and corporate earnings continuing to play the dominant roles, seasonality should therefore be considered one component of a broader investment framework rather than a standalone trading signal. Seasonal trends can provide useful context alongside fundamentals, valuations, and the macroeconomic environment, but they should not be treated as the primary catalyst for investment decisions.
Conclusion and Asset Allocation Views
September has historically been the weakest month for U.S. equities, and midterm election years have followed a similar pattern. As a result, some seasonal volatility over the coming weeks would not be surprising. History suggests, however, that September weakness can often prove temporary, particularly as markets approach the historically stronger portion of the midterm cycle and the typically favorable year that follows.
We remain constructive on the outlook for the fourth quarter, supported by an improving macroeconomic backdrop and continued earnings growth. From a tactical standpoint, any seasonal or election-related pullback could therefore represent an opportunity to reassess and potentially adjust positioning rather than an automatic reason to adopt a more defensive stance.
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