A New Report Suggests September Is the Worst Month to Buy Stocks. History Offers a Clear Answer for How to Handle This

The article highlights the historical “September Effect,” with the S&P 500 averaging a -1.13% decline in September since 1928 (and -1.4% over the past 25 years), though recent years have been less consistently weak (2024: +2.02%, 2025: +3.53%). A study also shows one-year forward returns from buying September are comparatively weak: 7.9% average and 8.7% median annual returns, the weakest median month. Despite the seasonality concern, JPMorgan Wealth Management urges investors to stay disciplined during potentially choppy conditions tied to geopolitical, fiscal, and monetary uncertainty rather than trying to time the market.

Analysis

This is less a directional equity signal than a positioning regime: September tends to matter when systematic vol-targeting, dealer hedging, and post-summer re-risking all coincide. That means the first orders of magnitude of pain should show up in crowded, high-duration exposures — large-cap growth, semis, and small caps — while low-vol/defensive sectors should hold up better on a relative basis. The edge is not in predicting a calendar drawdown; it is in anticipating where forced selling amplifies moves once realized vol ticks up.

Near term, the real catalysts are macro data and policy meetings over the next 2-6 weeks. If rates volatility rises, QQQ and IWM are more vulnerable than SPY because their ownership is more momentum- and factor-driven; that can create sharp but short-lived air pockets rather than a persistent bear trend. If the first week of September passes without a volatility spike, the trade quickly becomes less attractive because the market has already digested the seasonal narrative.

Contrarian view: the consensus may be overpaying attention to the calendar and underweighting how quickly markets adapt to known patterns. A straight short on the index has poor asymmetry because the seasonal edge is small and the recent sample has been inconsistent; the better expression is cheap downside insurance or a relative-value rotation. JPM may be a cleaner financials relative long than most banks if volatility picks up, while richly owned momentum names are the more fragile part of the tape.

Key Decisions for Investors

• Buy 4-8 week SPY put spreads or VIX call spreads into the first half of September as a low-cost hedge; size small because the edge is weak, but payoff improves if realized vol rises on CPI/FOMC.
• Rotate tactically from QQQ/SMH into XLP or XLU for the next 2-4 weeks; the thesis falsifies if QQQ reclaims trend and VIX stays sub-15 through mid-month.
• Avoid outright index shorts here; if you need bearish exposure, express it as a pair trade: short IWM vs long SPY for 2-6 weeks, since small caps are more financing- and flow-sensitive.
• Within financials, favor JPM over more rate-sensitive lenders on a 1-3 month view if volatility rises, as markets/trading can partially offset softer risk appetite.
• If SPY breaks above its short-term moving average and breadth improves after the first macro event, cover hedges quickly; the calendar effect is too small to justify holding negative convexity for long.