BIT Research: US Stocks Face Seasonal Weakness in September—How Much Longer Can the S&P 500 Climb After Hitting 7,200?

The US stock market is currently experiencing one of the strongest starts to a presidential term in modern history. Since early 2025, US equities have risen approximately 30%, compared with an average return of only about 12% for the S&P 500 across presidential election cycles since 2000. However, as September arrives, seasonal factors are beginning to flash caution signals: over the past 25 years, the S&P 500 has averaged a 1.1% decline in September, and the average decline in US midterm election years is even steeper at 1.7%.

Meanwhile, valuations have become clearly stretched. The S&P 500 currently stands at approximately 7,209 points, while a regression model based on corporate after-tax profits since 1985 implies a fair value of only about 4,302 points — roughly 39% lower. Even when using corporate after-tax profits adjusted for inventory valuation (IVA) and capital consumption (CCAdj), the model-implied fair value is only about 5,417 points, still approximately 25% below current levels.

With September's seasonal weakness compounded by high valuations, what near-term pressures does the US stock market face?

The next US midterm elections will be held on November 3. Historical patterns show that from August to October ahead of midterms, US equities tend to enter a consolidation phase, typically improving after the elections. Current market-implied probabilities suggest Democrats have roughly an 89% chance of taking the House and about a 51% chance of winning the Senate, with a divided government remaining the base-case scenario.

That said, the long-term trajectory of US equities still shows a clear upward bias. Over the past decade, for every down quarter, there have been roughly three to four up quarters on average. Since January 2024, the S&P 500 has posted 10 quarterly gains against just one quarterly decline. Therefore, while seasonality and high valuations argue for near-term caution, historical performance makes it difficult to turn outright bearish on US stocks.

With US debt at roughly $40 trillion, why do stocks and gold remain attractive?

Beyond high valuations, investors face another challenge: limited alternative assets. US debt has now reached approximately $40 trillion. If the long-term trend of the past 50 years had continued, the debt level would be around $25 trillion. The CPI index is also about 18% higher than what would be implied by extrapolating the pre-2008 trend. The persistent deviation of inflation and debt from long-term trends further elevates the importance of protecting real purchasing power.

Since the 2020 recession, performance across asset classes has diverged markedly. US equities and gold have been relatively strong, while bonds have remained under pressure, and real estate has been weighed down by high valuations and rising mortgage rates. Meanwhile, based on the historical relationship with current nominal GDP growth, the 10-year Treasury yield could arguably be closer to 6.0% rather than the current ~4.8%, suggesting bonds and real estate may continue to face headwinds.

Overall, September's seasonal weakness, the approaching midterm elections, and elevated valuations mean US equities still face adjustment pressure in the near term. However, against a backdrop of debt and inflation running persistently above long-term trends — and with limited alternative assets — stocks and gold remain relatively better positioned to protect purchasing power. Bitcoin shares similar characteristics, though its market size and capacity remain limited for large institutional players at this stage. Should the market experience a阶段性 pullback in September or early October, it could paradoxically create a more favorable market environment going forward.

Some of the above views are from BIT on Target. Contact us to receive the full BIT on Target report.

Disclaimer: Markets involve risk, and investment requires caution. This article does not constitute investment advice. Digital asset trading may involve significant risk and volatility. Investment decisions should be made after careful consideration of individual circumstances and consultation with financial professionals. BIT is not responsible for any investment decisions made based on the information contained in this content.