A September to Remember: 21 Trading Days. Stock Market Update, Friday October 10, 2025

Maybe 5 or 10 years from now investors will look back and cry about the 21 trading days in September of 2025 as the top of the AI bubble.  I doubt it will be the case that September 2025 marks the top and for now investors who have ignored the widely communicated “AI is just a bubble”, and the S&P500 in “overvalued” for the last 18-24 months are singing happily after the 21 trading days of September completed a strong 3q. I hope you are smiling as you review your 3q25 brokerage and 401k statements if you had a heavy allocation to stock both international, the S&P 500 and domestic large cap growth stocks.

As of October 3^rd, here is the ranked sector performance on a 3-month trailing basis as calculated by Fidelity.

Investors, this was a near historic 3q for stocks, particularly the combined returns of August and September which historically amount to nothing “net” over the 2 months with Augusts up return being most often erased by a down September. Here is a chart from Carson showing 3^rd quarter returns since 1970.

As September is historically the worst month of the year for stocks. How off footed were those that traded only on negative seasonals for September? It was the best September in 15 years and second best going back 27 years. Another great chart from Carson showing a September to remember returns the last 55 years.

The S&P 500 gained about +3.5%. The Nasdaq 100 gained about 5.25% and the SMH Semiconductor index gained about 12.5% on the month.  On the month.  Not the quarter or year.  The month. Here are those three charts for September.

The amazing thing, not a single day closed up or down more than 1%, making it a historically calm month of almost no volatility.

After such a strong rally, many investors may wonder if the good returns for 2025 are done. Should they tap out and call it a year? Historically, the answer is no. For ammunition on why high can go higher in the 4^th quarter? I’m going to keep quoting Carson data here as they too are very data driven and there’s no reason to recreate the wheel.

The October -December period is historically the strongest quarter of the year including the famous Santa Claus rally which I say starts about the 2^nd week in October not the 3^rd week in December.  Santa must prepare his list early to get all those Xmas gifts delivered at year end. Why not invest early too? 4^th quarter gains have averaged +4.2% the last 75 years with a 80%-win rate.

Here’s the seasonal chart for the last 10 years:

And here it is for t10 year period ending the top of the Dotcom bubble in 2000.

If you are following along since April 2025 lows corresponding to the LTCM lows in early October 1998, the overlay would put is in April 1999 with a few more months to go in our V-bottom rally to more new ATHs.  Would this make sense now? To me the answer is yes. No one still gets in.

The Presidential cycle is in investors’ favor in the 4^th quarter in the first year of the presidential cycle, leaning very positive averaging a +3.8% gain with a 77.8%-win rate.

And finally, investors, remember new ATHs are bullish not bearish as most financial commentators tend to discuss in tone on TV  Even more telling, when September has been strong, historically the 4^th quarter leans even stronger.

Looking back at these historical periods, yes they include the often mentioned Dot.com bubble in the late 1990s.  However, I must point out that the corresponding times back then were not at the end of the dotcom bubble but rather mid-run up in 96-98, not near the top in 1999-2000.

As I’ve discussed since mid-April, V-bottom moves and seasonal history says the rally in stocks isn’t over. We’ve covered the data the last few months on this. Go check out our prior videos on the topic. Since we continue to mirror the same pattern back during Dotcom almost to the day and week in the S&P500, I’m going to go back once again to the Dotcom/AI cycles overlay and look at sector performance in the 2q99-1q2000.  Recall mapping out a similar move since the V-bottom low in April would project a SP500 target of 7200 ish in 1q26 and 7300-7400 2026 as well. Here’s that overlay once again.

It says a pause or minor pullback is likely in the 4q but it should be bought not sold.

Today, the AI buildout is leading.  These high relative strength groups may pause for a few weeks after their stellar Septembers and 3q performance, but they will likely continue to work in the months ahead.  Throw in some down and out healthcare and energy names who have been beating numbers but whose values have been cut in half by government and economic growth fears.

Investors why not be prepared in advance of the 4q25, to hear about the “chase for performance into year-end” before it takes place.  Investors, if the V-bottom pattern continues its historical path, which I expect, expect some weakness end on repositioning and institutional tax selling, and maybe the first few days of November, which should be bought.  V-bottoms, historically, do not have ended or deep pullbacks on % terms until after the 10th and 11th month as you approach a year holding period for those investors who bought at or near the lows.

Know that regardless of the path for the economy and financial markets in the next few months, the investment team at OHFG will be here manning the ship.

Until next week, have a blessed weekend and know that the OHFG team is doing what we can to plan for you and your family’s future regardless of what stage you are at in your career or retirement.

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