Must See Charts: Is September a Risk or an Opportunity for U.S. Stocks?

Multiple market signals are flashing red as September begins. With CTA positioning near exhaustion, seasonal weakness, and critical macro events ahead, investors are asking: will stocks face a painful correction—or deliver a fresh entry point?

Key Risks Facing U.S. Stocks

The first is CTA positioning, which is already near full allocation. CTAs have been one of the main drivers of the recent rally, purchasing over $40 billion of U.S. equities in July and August. With CTA buying power exhausted, September—historically the weakest month for equities—may lack the support of fresh inflows.

In the coming week, if markets enter a downward channel, CTA models will sell $22.25 billion of global equities, including $4.84 billion in U.S. stocks. Over the next month, if a deeper selloff occurs, CTA models could be forced to offload as much as $217.92 billion globally, with $73.69 billion in U.S. stocks.

Because CTA funds follow systematic, rules-based strategies, their flows tend to amplify market momentum. Historically, September is a month of heightened volatility and weaker equity performance, making concentrated CTA unwinds more likely. CTA positioning is already trending lower.

The second risk is seasonality. “Sell in May” could almost be rewritten as “Sell in September.” Since 1928, U.S. equities have averaged -1.17% returns in September, with the second half of the month marking the weakest two weeks of the year at -1.38%. By contrast, the first half tends to be more stable.

Looking at presidential election cycles since 1927, the probability of the S&P 500 falling in September during the first year of a cycle is 58%, making it the second-worst month historically. Since 1950, in the 18 post-election Septembers, only three ended in gains. Historical precedent suggests U.S. equities are entering a 6–8 week window of seasonal weakness.

While record dealer long Gamma positioning may cushion volatility by mechanically buying dips and selling rallies, peak levels often precede downside in the S&P 500. Historically, average returns in the following two months were -4.6% on the downside and only +1.9% on the upside.

Additional catalysts include the FOMC meeting, VIX expiration, OPEX, and the buyback blackout window—all of which could exacerbate volatility. Although markets are pricing in Fed easing, the pace of cuts remains a key risk factor.

If August nonfarm payrolls beat expectations, rate cut bets will be priced out quickly, liquidity could tighten, and equities may face pressure.

If payrolls disappoint, markets could find temporary support, but doubts over sustained Fed cuts amid inflation concerns may keep recession risks in play.

On September 17, VIX futures expiry could trigger unwinding, coinciding with the FOMC meeting, potentially intensifying volatility. Non-commercial VIX short positions are at their highest since 2022; any catalyst could spark a short squeeze, adding downside risk to equities.

Other global risks are adding pressure. Debt-related concerns in Europe and the UK have triggered long-bond selloffs, spilling over into equities. Japanese yields are also surging, with the 20-year JGB at its highest since 1999 and the 30-year at record highs. Meanwhile, U.S. 30-year yields have climbed above 5%. Expectations of a BOJ rate hike and continued unwinds of U.S.-Japan carry trades are further weighing on equities.

Corrections Still a Buying Opportunity

Despite these risks, the overall trend for U.S. stocks remains upward. While some mega-cap and AI-linked names trade at extreme valuations, the broader market dynamic is more about rotation than wholesale selling. Short, sharp volatility could drive style shifts, not lasting downturns.

Historically, after September weakness, U.S. equities often peak in November or December. With global liquidity still supportive, the S&P 500 may have as much as 10% further upside.