Strategists Argue Strong Market Breadth Neutralizes September’s Historical Weakness
Ryan Detrick of Carson Group argues that the S&P 500’s strong performance in August and broad market participation invalidate the historical trend of September being the worst month for stocks since 1950. While the index is up 12.8% year-to-date and volatility remains low, analysts warn that elevated 10-year Treasury yields and low trading volumes could still trigger volatility. The current environment features robust earnings growth across nearly all sectors, contrasting with the weak conditions that typically precede sharp September declines.
Key points
- The S&P 500 is up 12.82% year-to-date, with the SPY ETF rising 5.47% in the trailing month, indicating a strong entry point for September.
- Approximately 70% of S&P 500 stocks are trading above their 200-day moving averages, signaling broad market participation rather than reliance on a few megacaps.
- The VIX volatility index sits at 14.51, reflecting low market anxiety, while the 10-year Treasury yield stands at 4.67%, near its 92nd percentile for the year.
- Earnings growth is described as the strongest since Q3 2021, with 10 of 11 sectors reporting double-digit profit increases.
- The University of Michigan consumer sentiment index rebounded to 55.2 in July but remains below neutral levels, suggesting cautious consumer behavior.
Background
This analysis follows a period of significant market volatility and economic uncertainty. In July 2026, the US experienced its hottest month on record since 1895, which impacted energy costs and consumer spending. Additionally, retail giant Walmart reported slow US same-store sales growth in early August, citing a softer consumer environment and higher gas prices, which aligns with the subdued consumer sentiment noted in the current market analysis. Meanwhile, tech stocks like Oracle have faced significant corrections due to AI growth concerns, highlighting the fragility of valuation-sensitive sectors amidst rising interest rates.
Why it matters
Investors often use seasonal patterns to make trading decisions, but this analysis suggests that current fundamental conditions, such as broad earnings growth and low volatility, may override historical trends. However, the risk of rising interest rates remains a critical factor that could pressure equity valuations regardless of seasonal patterns. Understanding the distinction between calendar-based fears and actual market conditions is essential for portfolio management in the coming months.
What to watch
Markets will closely watch Federal Reserve Chair Kevin Warsh's upcoming comments and any potential rate decisions, as these will significantly impact equity valuations. Traders should also monitor trading volumes, which are currently low, as increased participation could amplify price movements. Additionally, the performance of AI infrastructure stocks and broader enterprise adoption of AI technologies will be key indicators of market resilience.
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