September Showdown: Bulls Face Historic Weakest Month for US Stocks

US stocks historically weaken in September, with the S&P 500 falling 56% of the time during the month. Institutional investors rebalance, retail traders slow buying, and corporate buying goes dark. Valuations are high, computer-driven traders are near maximum allocation, and hedge fund equity exposure is extended. Selling pressure may arise from pension funds, mutual funds, and retail traders slowing their buying pace.

As the calendar turns to September, investors are bracing for a historically weak month for US stocks. The S&P 500 has fallen 56% of the time during September, by an average of 1.17%, according to Bank of America Corp.'s Paul Ciana [1]. This seasonal turbulence is set to be exacerbated by various factors, including institutional investor rebalancing, a slowdown in retail trading, and corporate buying pauses.

Institutional investors typically rebalance their portfolios at the end of the quarter, which can lead to increased selling pressure. Retail traders, who have been active in the market, are expected to slow their buying pace in September, according to Citadel Securities' data [1]. Additionally, corporate buying is likely to cool down ahead of third-quarter earnings.

Valuations in the market are currently high, with the S&P 500's 17% surge since early May pushing valuations to 22 times projected earnings, levels associated with the end days of the dot-com bubble [1]. Computer-driven traders, who focus on trends rather than fundamentals, are near maximum allocation to US stocks, and hedge fund equity exposure has hit the 80th percentile [1]. This extended positioning could contribute to market volatility.

September and October are traditionally the months when volatility peaks, with the Cboe Volatility Index (VIX) trading around 20 [1]. In the options market, positioning shows that traders are becoming more cautious in the near term, as the cost of protection against a steep selloff has risen significantly [1].

Moreover, the market will have to grapple with several macroeconomic events, including the latest government hiring report, two readings on inflation, and the Federal Reserve's highly anticipated policy decision. President Donald Trump’s continued criticism of the central bank's independence adds another layer of uncertainty [1].

Marvell Technology's recent Q2 2026 earnings report offers a contrasting narrative. The company reported a 58% year-over-year increase in revenue, driven by robust demand for AI infrastructure and enterprise networking recovery [2]. Despite beating earnings estimates, the stock fell post-earnings due to guidance below the $0.74 non-GAAP EPS target for Q3 [2]. This underscores the market's sensitivity to guidance precision, even when companies report strong results.

NVIDIA Corp. also reported strong second-quarter results, with a 56% increase in revenue and a 59% rise in net income compared to a year ago. However, sales in its main data center division came in slightly below Wall Street estimates, leading to a stock drop in after-hours trading [3].

In conclusion, while September historically presents challenges for US stocks, the market's current state of high valuations and extended positioning adds another layer of complexity. Investors must navigate these factors while also keeping an eye on macroeconomic events and corporate guidance. For long-term investors, the key lies in maintaining a disciplined approach and staying informed about market dynamics.

References:
[1] https://www.bloomberg.com/news/articles/2025-08-29/stock-bulls-bracing-for-bout-of-september-s-seasonal-turbulence
[2] https://www.ainvest.com/news/marvell-q2-performance-strategic-inflection-point-long-term-investors-2508/
[3] https://www.nbcnews.com/business/business-news/look-nvidias-latest-results-prominence-stock-market-nrcna227721