Good morning, investors. Big Tech just saw its most lopsided earnings week in recent memory and more quarterly results will come from Palantir, AMD and Disney over the coming days.

At an index level, though, history says look out below.

The stock market just entered its weakest stretch of the year. 

The S&P 500 has seen negative monthly returns in August and September on average dating back to 1990. 

That soft seasonality arrives with the index already up an unusually robust 9% year-to-date and right at its record high.

At the same time, though, that strength runs counter to the usual annual weakness for midterm election years.

Midterm years have produced the lowest average returns of the four-year presidential cycles for the last three decades, with intra-year drawdowns often exceeding double-digits. 

As if on cue, the S&P 500 this year has seen a 9% drop.

But it’s also rebounded far quicker than prior midterm years, which can be explained by a combination of the AI boom and the general willingness among investors to buy the dip under the current administration.

Notably, the Nasdaq 100 just posted its worst month since March 2025, one sign that the seasonal churn may have started early in technology — the most crowded corner of the market for the better part of three years.

Still, a new analysis by ProCap Insights found that this stretch of weakness is almost always a favorable entry point. 

The S&P 500 has turned negative across August and September in 17 of the last 36 years, yet the index has turned higher in the fourth quarter in 16 of those instances for a 94% hit rate. 2008 was the only exception.

Investors conditioned to sell into the fall have generally sold too early.

On average, the data supports buying any summer dips as a set up for a year-end rally rather than the start of a deeper correction. 

To be sure, it’s still a midterm year, Fed policy remains up in the air and the Iran conflict continues to follow a start-and-stop cadence. 

None of this will help smooth out volatility.

But history nonetheless has rewarded investors who buy the seasonal dip far more frequently than it has punished them.

SK Hynix makes the high-bandwidth memory that sits alongside chipmakers's accelerators, which ties its results to the pace of the AI buildout.

The Direxion Daily SK Hynix Bull 2X ETF (SKHL) seeks 200% of the daily performance of SK hynix through swaps referenced to its Nasdaq ADR.

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📊 President Trump paused Iran strikes once again. Tehran and other Middle East powers told him they’re working on an agreement that could reopen the Strait of Hormuz, though similar deals have fallen through over the last month. (Bloomberg)

📉 Leopold Aschenbrenner’s hedge fund lost 67% in July. His fund, Situational Awareness, remains up about 80% this year even after the decline. Much of his declines can be chalked up to leveraged positions. (Yahoo Finance)

🤖 The US-China AI race continues to heat up. Successive frontier models from Chinese labs have matched or exceeded American peers this year in benchmarks that matter to enterprise buyers. (CNBC)

🗓 August 3, 1932: The Dow Jones Industrial Average surged 9.52% in a single session, its biggest one-day gain since 1929 and the third-largest in market history at the time.

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