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“If you can make it through the night, there’s a brighter day.” – Tupac Shakur

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After the worst week in months to start September, the S&P 500 has already rallied more than 3% this week, and if it can finish the day in the green today, it will have had its second ‘perfect’ week in a month (and second five -day perfect week this year). At this point, futures are cooperating with modest gains as declines in Adobe (ADBE) and Boeing (BA) have been offset by rallies in Oracle (ORCL) and RH.  To hold on to those gains, though, they’ll have to get through Import Prices at 8:30 and Michigan Sentiment at 10:00.

Even after the gains this week, the S&P 500 remains down close to 1% this month, so September has already lived up to its reputation for being the weakest month of the year. If the month continues to follow the seasonal trend, bulls should remain on guard. The snapshot below from our Seasonality Tool shows that based on the last ten years, the upcoming one-month period has historically been one of the weakest periods for the S&P 500. Over the last ten years, the S&P 500’s median performance over the next month has been a decline of 1.79% which ranks in just the first percentile relative to all other one-month periods throughout the month.

That’s the bad news.  The good news is that despite the next month being so weak, the next three months have historically been among the best periods of the year for the S&P 500.  With a median gain of 4.65%, the SP&P 500’s performance over the next three months ranks in the 87th percentile relative to all other periods.

The composite chart below illustrates the pattern.  While the back half of September typically experiences sharp declines, the last three months have been strong. To borrow a phrase from Tupac Shakur, who died 28 years ago today, “If you can make it through the night, there’s a brighter day.”

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