So here’s the thing about September – it’s supposed to be the market’s villain origin story. Historically, it’s been the worst month for stocks, with the S&P 500 managing to stay positive only 44.9% of the time since 1928. September is basically the market equivalent of that friend who always cancels plans last minute.
Except this year, September decided to be the overachiever nobody saw coming.
Through the first three weeks, the S&P 500 jumped 3.2%, the Dow climbed 1.7%, and the NASDAQ absolutely crushed it with a 5.5% gain. That’s not just breaking the rules – that’s setting the rulebook on fire and doing a victory dance.
The Fed Finally Did Something (Sort Of)
The Federal Reserve cut rates by 0.25% last week, bringing them down to 4.00-4.25%. Now, some folks wanted a bigger 0.5% cut, but the Fed went with the “let’s not get too crazy” approach. Why? Because retail sales came in hot (up 0.6% vs. expected 0.3%), and inflation is still being that annoying houseguest that won’t leave.
But here’s the kicker – Fed Chair Jerome Powell basically admitted the job market is looking shakier than a house of cards. Only 22,000 jobs were added in August (ouch), and unemployment ticked up to 4.3%. Translation: The Fed is now more worried about jobs than inflation, which is a pretty big deal.
Why This Rally Has Legs
This isn’t just a flash in the pan. Several factors are lining up like dominoes ready to fall in investors’ favor:
Quarter-End Window Dressing: Fund managers are about to make their portfolios look pretty for clients by dumping losers and buying winners. It’s like cleaning your room before your parents visit, except with billions of dollars.
Earnings Season Magic: Q2 earnings were already spectacular, with 81% of S&P 500 companies beating expectations. Q3 is looking even better, with analysts expecting 7.7% earnings growth. When companies keep surprising to the upside, stocks tend to follow.
The Early January Effect: Come November, money typically starts flowing into retirement accounts and year-end bonuses get deployed. It’s like Black Friday for small and mid-cap stocks.
The Bottom Line
September was supposed to be the market’s kryptonite, but instead it became its rocket fuel. With dovish Fed policy, strong earnings momentum, and institutional money getting ready to deploy, we’re looking at what could be a powerful finish to 2025.
The pieces are falling into place for something bigger than just a September surprise. When seasonal trends flip this dramatically, when the Fed shifts gears, and when earnings keep beating expectations, smart money pays attention.
Sometimes the market throws you a curveball. This September, it threw a fastball right down the middle – and investors who were paying attention are already rounding the bases.