GM. This is Milk Road Macro, the newsletter that spots patterns better than your favorite technical analyst with twelve tabs of TradingView open.
Here’s what we got for you today:
- ✍️ What’s the deal with September seasonality?
- 🎙️ The Milk Road Macro Show: Why Government Debt Is Breaking the Global Economy w/ Quinn Thompson
- 🍪 Trump asked the Supreme Court to uphold his tariffs
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WHAT’S THE DEAL WITH SEPTEMBER SEASONALITY?
Every September, financial media dusts off the same old charts.
“The worst month for stocks and risk assets”.
It’s the “September effect”, they say (and it’s spooky).
Seasonality always draws eyeballs - on the surface it’s an easy narrative to understand, and humans crave patterns.
For some reason, it seems to be a particularly popular meme this year - with my X feed full of September experts.
It feels like everybody has a case of the “September Scaries”.
So what’s the deal with September seasonality?
Is it really as bad as everybody makes out?
And what is the best way to think about it?
Let’s take a look…
What’s the deal with September seasonality?
September is statistically the worst month for risk asset prices, on average.
That’s really the heart of the matter.
Over the past 20 years, the mean average S&P 500 performance in September is -0.7% (one of only two negative calendar months, alongside June).
Here’s a chart of 50-year performance if you’d held the S&P 500 for just one calendar month (September in pink).
You can scare yourself even more, by going even further down the seasonality rabbit hole and looking at only post-election years.
The years following a US election have an even worse average September performance.
It’s also a similar story for Bitcoin and most other cryptocurrencies (although there’s obviously much less data to go by).
For Bitcoin, September is the only calendar month that has a negative mean average return.
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WHAT’S THE DEAL WITH SEPTEMBER SEASONALITY? (P2)
But, why is this the case?
So, why is September statistically the worst month for risk assets?
Good question.
There’s not really any one convincing answer.
But here are a few potential reasons:
- Vacation ending/rebalancing: Institutional investors and fund managers often return from summer holidays in September, leading to portfolio rebalancing, profit-taking, or tax-related selling.
- Retail withdrawals: In the US, individuals might withdraw funds after the summer to pay for tuition, taxes, and other seasonal expenses creating selling pressure.
- Mutual fund year-end: Many mutual funds have fiscal years ending in September or October. They may harvest losses or lock in gains to manage tax liabilities, which can create extra selling pressure.
- Lower liquidity carryover from August: Trading volumes are often lighter in the summer, so repositioning in September can cause outsized market moves.
- Psychology and feedback loops: Once September became “known” as a weak month, it’s possible that self-fulfilling behavior started to reinforce the effect.
But is it really as bad as everybody makes out?
Looking deeper into the data - September doesn’t actually look that bad.
Let’s start with what type of “average” is being used.
Most September seasonality charts are created using a mean average (which can be pulled around by extreme outliers).
But the median average (the middle value when all monthly returns are lined up from worst to best) isn’t quite as bad.
The S&P 500 75-year mean average for September is -0.7%, while the median average is -0.3%.
Seasonality charts also tend to “hide” how noisy the data actually is.
It’s just not really the case that September is conclusively a bad month.
The 75-year “win-rate” for the S&P 500 in September (whether it ends the month positive) is 44%.
So, only marginally worse than a coin flip.
We can also look deeper into the data by looking at a “distribution analysis” from Market Radar.
This plots every single monthly S&P 500 return for the past 75 years, showing the full range for every calendar month.
It’s clear that September doesn’t really stick out that much as a particularly negative month overall.
September has delivered a lot of years with +2% or even +5% gains - outcomes you’d never see if you only looked at a seasonality chart.
How to think about seasonality
I’m not a big fan of “seasonality”.
In particular, attempting to actively trade solely around seasonality trends can get you tied up in knots, and leave you in a worse situation than where you started.
There have been plenty of very good Septembers over the years.
What is more important is understanding the underlying market regime.
Because this is what ultimately fuels risk asset prices.
And right now we are in a risk-on regime, in my opinion (you can read my detailed thoughts in the latest Milk Road Macro PRO report).
I would describe the current macroeconomic environment (in the US in particular) as a “reacceleration” or “reflation” regime.
Both growth and inflation appear to be accelerating.
This is a bullish regime for risk assets.
And this is the most important thing to keep in mind, in my view.
Additionally, what’s the most important thing happening in September this year?
We have the Federal Reserve likely to cut interest rates this month after a long pause.
If we look back at the previous years when this has occurred (a September rate cut after a long pause) there are two other instances - September 1998 and September 2024.
Both of these Septembers saw positive S&P 500 returns, with an average gain of 3.3%.
Wrapping up
Yes - September is statistically the worst month of the year for risk assets.
This is clear, and it’s worth bearing in mind.
But if you actually look deeper into the data, it’s almost not worth worrying about.
The data is so noisy that the seasonality doesn’t really hold up to any scrutiny.
There are much more important market-moving factors to think about.
So far, there’s little sign of “spooky September”.
At the time of writing, the S&P 500 is flat for the month and Bitcoin is +1.8%.
That’s it for this edition - catch you in the next one.
MACRO’S BROKEN, AND IT MATTERS 📉
Today we sat down with Quinn Thompson (Lekker Capital, ex-Guggenheim) for a clear-eyed look at what’s actually driving markets — and why the September “seasonality effect” might be the least of your worries.
Here’s what you’ll hear:
- Why bond yields are exploding, and who’s really pulling the strings
- How rate cuts could backfire if Treasury keeps pumping supply
- Gold vs. Bitcoin: the real store-of-value winner (for now)
- What comes next if the Fed cuts into a still-inflated market
It’s a banger of an episode, don’t miss it 👇
YouTube | Spotify | Apple Podcasts
BITE-SIZED COOKIES FOR THE ROAD 🍪
As was widely expected, President Trump has asked the Supreme Court to uphold his global tariffs. A large chunk of tariffs were deemed “illegal” last week by the Court of Appeals, so this is the next step for the Trump team in attempting to keep tariffs in place.
Chinese demand for Nvidia chips remains strong despite efforts by the Chinese Government to strongly discourage companies from dealing with the US brand. Many of China’s biggest tech firms are still pursuing purchases of Nvidia’s upcoming powerful new model - the B30A.
Gold has been surging to a new all-time high this week ($3,500 an ounce), and Wall Street analysts think it could go a lot higher. Goldman Sachs analysts say continued attacks on Federal Reserve independence could send the yellow metal to almost $5,000 an ounce.
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