• S&P 500 Index: +2.6%
• Dow Jones Industrial Average: +1.3%
• Nasdaq Composite Index: +3.9%
• Russell 2000 Index: +0.9%
• S&P Target Risk Moderate: +1.3%

For decades, stocks have tended to struggle from late summer into early fall. As I noted in last month’s letter, August and September are the two weakest months of the year on average, and that pattern has historically been more pronounced in midterm election years. Over the past 75 years, September is the only month in which the S&P 500 has produced more down months than up months. The index has finished September lower in seven of the past twelve years, including four of the past six.

August, by contrast, was a relatively calm month. Volatility remained subdued, and equities were broadly strong.

More importantly, the market has largely ignored the seasonal script this year. Year to date, stocks are meaningfully ahead of the average midterm-year pace. Through this point on the calendar, 2026 ranks as the third-best midterm year since 1950. The two years ahead of it, 1954 and 1958, both finished with strong rallies into year-end.

Ryan Detrick and the team at Carson Investment Research recently highlighted data that reinforces the point. The table below shows every year since 1945 in which the S&P 500 entered September up between 10% and 17.5% year to date following a positive August. In those eleven instances, the index was higher over the final four months of the year ten times, with an average gain of 5.6%.

The next few months bring no shortage of potential catalysts:

• September 11: CPI/inflation report
• September 16 and October 28: Federal Reserve meetings and interest rate decisions
• Mid-October: Q3 2026 earnings season begins
• November 3: Midterm elections
• Ongoing: Rising Treasury yields and the conflict involving Iran

Depending on the outcome, each event could put downward pressure on stocks over the next two months, which is not unusual for this time of year.

Fundamentals remain a source of strength

On the other side of the ledger, the fundamental backdrop for U.S. equities remains exceptionally strong. As of August 24, the S&P 500 (data from LPL Research and FactSet):

• Was on pace for 30% earnings growth and 15.5% revenue growth in the second quarter
• Saw 86% of reporting companies beat earnings estimates
• Saw 75% of reporting companies beat revenue estimates

Companies are also raising forward guidance at a pace we have not seen in years. The chart below from Bespoke Investment Group tracks the net share of companies raising versus lowering guidance, and the message is clear: management teams are optimistic about their own prospects over the next six to twelve months.

The underlying strength of publicly traded U.S. companies bodes well for long-term performance. At the same time, given the number of events on the calendar, we cannot rule out a short-term pullback over the next couple of months.

Our investment thesis has not changed since the beginning of the year. We expect volatility ahead, and that expectation has been built into our 2026 planning from the start.

As always, don’t hesitate to contact our team with any questions.