Investment Perspective
A well-built investment process addresses both halves of the investing equation: what to buy, and just as importantly, when and what to sell.
US equities rebounded in August, snapping a two-month losing streak for the S&P 500 and Nasdaq Composite. The S&P 500 Index gained 2.7% for the month and the Nasdaq Composite rose just over 4%. Year-to-date (YTD), the S&P 500 is up a healthy 13.1% through August, the Nasdaq Composite has advanced nearly 17%, and the small-cap Russell 2000 Index continues to show new life, approaching a 20% gain for the year.
August also extended a theme we highlighted in last month's letter: broadening participation across sectors and risk assets. The equal-weighted S&P 500 has returned 15.5% YTD, outpacing the cap-weighted Index by 2.4%. The "Magnificent 7" mega-cap technology stocks, as a group, are up just over 4% this year, continuing to lag the average stock in the Index and reinforcing that the reversal in concentrated leadership remains intact.
Commodities were the best-performing major asset class in August, with the Bloomberg Commodity Index returning 7.4%, driven largely by gold’s nearly 10% gain for the month. The best-performing US equity sector was also commodity-linked: energy, with the Energy Select Sector SPDR ETF (XLE) rising 7.3%. More broadly, commodities continue to benefit from a weaker dollar, rising inflation concerns, and supply constraints tied to the ongoing Iran conflict.
International markets remained meaningful contributors to diversified portfolios. Emerging market stocks rose 3.4% in August and are up 24.4% YTD, while developed non-US markets (MSCI ACWI ex-USA) gained 2.6% for the month and are up 17.4% for the year. Non-US equities remain among 2026’s best-performing major asset classes, as a weaker dollar and stretched US valuations make international markets look increasingly attractive by comparison.
Federal Reserve Chair Kevin Warsh, who succeeded Jerome Powell earlier this year, delivered a keynote address at the Fed’s Jackson Hole symposium in late August that many are calling decidedly hawkish. Warsh noted that while summer inflation readings had come in better than expected, they did not yet signal a meaningful improvement in underlying inflation trends, and that the Fed still had “work to do” on price stability.
Markets quickly repriced the odds of a rate hike at the Fed’s upcoming September 16 meeting. Before the speech, fed fund futures had assigned a low probability for any rate move before December. But by the following Monday, futures implied roughly a 60% probability of a quarter-point increase. The bellwether 10-year Treasury yield also moved higher, touching a 17-month high near 4.8%.
With long-term yields climbing and concerns mounting over a federal debt load that has now surpassed $40 trillion, Treasury Secretary Scott Bessent has indicated the Treasury plans to repurchase long-dated government bonds in an effort to temper rising yields. History suggests such efforts to defy market forces rarely succeed as investors tend to see through “artificial” interventions, which can end up exacerbating the very problem they were meant to solve.
September has arrived, and as we note every year at this time, it is historically the worst calendar month for the stock market. The reasons why remain more theory than fact. One common explanation is that investors, both institutional and individual alike, return from summer vacation in September and rebalance portfolios accordingly. Yet September also tends to be the weakest month for stocks in countries outside the US, including Canada, Germany, Japan, and the UK, where the “back from vacation” theory may not necessarily apply. The truth is no explanation has been conclusively proven.
Still, when a pattern is well-documented and persists across a large sample size, it is worth acknowledging, even without a fully satisfying explanation. Betting against long-standing market tendencies has proven costly for many investors over the years, and the chart below (which dates back to 1928) illustrates just how consistent this one has been.
S&P 500 monthly seasonality — average return and hit rate, 1928–2025. Source: Bloomberg, compiled by Citadel Securities. For illustrative purposes only; past performance does not guarantee future results.
For September, the S&P 500 Index has closed lower in 55% of years, with an average monthly return of negative 1.1%.
It’s also worth noting that during midterm election years, like 2026, Septembers tend to be even weaker.
S&P 500 September seasonality since 1928. Source: RIA Advisors; data via Bloomberg, Citadel Securities.
The chart above shows that during midterm election years, the S&P 500 Index has averaged a -1.5% return in September, worse than the -1.1% average across all years. The likely explanation: a potential shift in congressional power raises questions about future government spending, tax policy, oversight, and regulation, and that uncertainty tends to translate into heightened near-term volatility.
Given that investment horizons should be long-term, why mention a one-month seasonal pattern at all? Two reasons. First, being aware of these tendencies helps you avoid being blindsided if/when they play out. Second, that awareness creates optionality. For example, if you have cash to deploy, you might wait until the end of September; or if you have gains to harvest, late August could be a prudent time to do so. By no means are we urging wholesale portfolio changes, only noting that these tendencies exist and that perhaps smaller decisions can be made with them in mind.
Heading into September, our positioning remains consistent with the approach we’ve discussed in recent letters. Elevated equity valuations and stretched investor sentiment continue to argue for a measured, well-diversified posture rather than a fully offensive one, especially with traditional market indicators having behaved unusually since the 2020 pandemic.
As always, we welcome the opportunity to discuss how these themes apply to your specific situation. Please don’t hesitate to reach out with any questions.
Thank you for your continued confidence.
Measured Wealth Private Client Group, LLC ("Measured Wealth") is an investment adviser located in Rye, New Hampshire, registered with the SEC. Registration does not imply a certain level of skill or training.
This publication is provided to clients and prospective clients for general informational and educational purposes only. It does not consider any person's individual needs or circumstances and is not investment, tax, or legal advice, or a recommendation, offer, or solicitation to buy or sell any security or to enter into an advisory agreement. Please consult your tax or legal professional regarding your individual situation.
Individual securities (including the "Magnificent 7," a market term), indices, and exchange-traded funds, and their returns, are shown for illustrative purposes only, to demonstrate recent market trends. They are not presented as Measured Wealth portfolio holdings or recommendations, and do not represent the past or current performance of any Measured Wealth strategy. Measured Wealth clients may hold positions in securities discussed, and Measured Wealth may buy or sell them at any time. Indices are unmanaged and cannot be invested in directly.
Data is drawn from third-party sources, including FactSet, Bloomberg, Russell, S&P Dow Jones Indices, MSCI, the Federal Reserve Bank of St. Louis, and YCharts, that Measured Wealth believes to be reliable but has not independently verified and cannot guarantee as to accuracy, timeliness, or completeness.
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