By Kyle Plotkin
Investment Advisor Representative
[email protected]
This weekend marks the unofficial end of summer. The kids are back in school, the nights are getting colder, and football season is almost here. The financial markets experienced a good end of the summer in August. The S&P 500 gained 2.6%, with the tech-heavy Nasdaq rising 3.9%, but semiconductor and AI stocks got killed. But as usual, the headline numbers weren’t the whole story. Energy led the S&P 500 sectors with a gain of about 7%, followed by technology, materials, and healthcare. Utilities was the worst-performing sector, losing more than 4% on the month.
Oil prices and interest rates dominated much of the financial news. Renewed tensions in the Middle East pushed crude oil prices higher late in the month, with Brent crude closing August above $90/barrel. Higher energy prices can add to inflation concerns, complicating things for the Federal Reserve as it moves closer to its next rate decision scheduled for September 16th.
Bond yields have moved higher as well. The 10-year treasury yield finished August around 4.75%, its highest level since January 2025. Higher yields mean higher borrowing costs throughout the economy and can create headwinds for small- and mid-cap stocks, which tend to rely more heavily on borrowed money. Higher yields can also pressure growth stock valuations, particularly as tech companies continue investing heavily in AI infrastructure and data centers.
Now the calendar has turned to September, which is historically the weakest month of the year for the S&P 500. Since 1928, September has produced an average decline of about 1.1% and has finished in the red more than half of the time during that span.
The midterm elections further complicate the picture. Markets typically face higher uncertainty leading up to midterms, as changes to the political environment can impact business outlooks. Since 1974, the S&P 500 has produced an average return of just 1.7% from August 1 through Election Day, but averaged 5.7% in the three months immediately following the election. In the six months after the past 13 midterm election cycles, the S&P has been positive every time with an average return of 12.4%.
So what does it all mean? Nobody knows for sure. Markets go up and markets go down. Geopolitical events are always happening, the economy is always changing, and nothing lasts forever. Historical patterns can give us useful context, but they cannot tell us what happens next.
Here at FRS, we continue to monitor the changing market conditions and adjust our portfolios as opportunities and risks shift between market sectors.
Have a fantastic Labor Day Weekend!