Playing The Odds On U.S. Stocks In August And September 2025

Historical data indicates a significant seasonal pattern in asset performance, with August typically being a strong month for US stocks, averaging a 1.2% return for the S&P 500 with a 64% probability of profit. Conversely, September stands out as the weakest month for US equities, showing an average S&P 500 loss of 0.8% and only a 50% chance of positive returns. For investors, this suggests maintaining US stock exposure in August but considering a strategic shift for September by underweighting US Technology stocks (historically poor performers) and overweighting Gold and International Bonds, which have historically yielded positive average returns of 0.45% and higher probabilities of success in September.

Analysis

Based on a 99-year analysis of monthly returns, a significant seasonal divergence exists for US equities between August and September. Historically, the US Total Stock Market has performed best in August, delivering an average return of 1.20% with a 66% probability of a positive outcome. In stark contrast, September is the weakest month for US stocks, registering as the only month with an average negative return of -0.8% for the S&P 500 and a profitability rate of just 50%. This underperformance is particularly pronounced in US Technology stocks, which have historically lost an average of -0.79% in September. Conversely, gold and international bonds have demonstrated defensive strength during September, both yielding an average return of 0.45%, with gold realizing positive returns 83% of the time. The current market context shows US stocks up 7.86% year-to-date in 2025, setting up a conflict between recent positive momentum and the strong negative seasonality ahead. Notably, diversification into foreign securities and gold has reportedly added value in 2025, reversing a 15-year trend of US stock market dominance.

Key Decisions for Investors

• Investors may consider maintaining US equity exposure through August to capture its historical strength, but should prepare for potential volatility and negative returns in September.
• A tactical portfolio adjustment for September could involve reducing exposure to the broad US market and specifically underweighting US Technology stocks, which have historically been the worst performers during the month.
• Consider increasing allocations to assets that have historically performed well in September, such as gold and international bonds, which have demonstrated positive average returns and a high frequency of gains.
• Monitor the interplay between the market's strong year-to-date momentum and September's negative seasonality, as a deviation from the historical pattern could signal a shift in the prevailing market regime.