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“Practice isn’t the thing you do once you’re good. It’s the thing you do that makes you good.” – Malcolm Gladwell

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Right on cue, the first trading day of September has been accompanied by weakness in the futures. One caveat worth pointing out is that much of the weakness is only erasing the late-day surge in the final minutes of trading last Friday.  Overnight in Asia, most major benchmarks were also lower, but the magnitude of the losses was mostly modest.  Similarly in Europe, the STOXX 600 is down less than 0.5%.

Looking ahead to the rest of the trading day, we’ll get a first look at manufacturing activity and sentiment for August with Manufacturing PMIs from S&P at 9:45 and ISM at 10. Also at 10, we’ll get the latest update on Construction Manufacturing, but that’s a July number.

The negative level of equity futures to kick off September should surprise no one as stocks have gotten a lot of practice being weak in September.  Just over the last 20 years, the S&P 500’s median performance the day after Labor Day has been a decline of 0.14% with gains just 40% of the time. More recently, the first real workday of September has been even weaker with declines in seven straight years for a median loss of 0.42%.

With a weak start, Labor Day week has also tended to be weak. Over the last 20 years, the median decline has been 0.20% with gains just half of the time. Over the last four years, Labor Day week has seen declines of at least 1.3% three times. The one exception was in 2022 when the S&P 500 rallied 3.65%.

During the rest of September after Labor Day, performance has been extremely bifurcated. While the S&P 500 has been positive slightly more often than it has been negative, and the median return has been slightly positive (0.26%), the last four years have been weak. As shown in the chart below, performance from the Friday before Labor Day through month end has been negative by at least 1.87% in of the last four years.

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