Ditch These Historic ETF September Underperformers

Subscribers to Chart of the Week received this commentary on Sunday, Sept. 6

Last week we covered the 25 best S&P 500 Index (SPX) stocks to buy in September, highlighting blue-chip Caterpillar (CAT) as an unexpected winner. With only a few days under our belt, the historically bearish month has already experienced no shortage of volatility. Today we’re letting history do the talking once again, drilling down specifics for exchange traded funds (ETFs). More specifically, what are the ETFs you should be avoiding this month?

Per Schaeffer’s Senior Quantitative Analyst Rocky White, five names over the past 10 years have carved out a spot on the bottom of the list of ETF September seasonality.

Communication Services SPDR (XLC)

XLC averages a 25% September win-rate with an average loss of 2.28%. The communications ETF just wrapped up weekly loss and is below its year-to-date breakeven threshold. The downside of having Meta Platforms (META) and Alphabet (GOOGL) among your chief holdings is that you’re at the mercy of Big Tech profit taking. XLC nabbed a record high of $120.40 on Feb. 2, but in the last few months, $114 has been a formidable ceiling.

SPDR S&P Pharmaceuticals (XPH)

XPH has finished September lower eight times in the last decade, with an average return of -2.07%. The pharma ETF has suffered from profit taking since its Aug. 19 record peak of $74.34, fueled in part by the massive breakthrough Moderna (MRNA) and Merck (MRK) are cooking up. The good news is the $70 floor and 50-day moving average have stepped in as support. Circle back to see if seasonality or technical support win out.

Financial Select Sector SPDR (XLF)

Despite a recent rebound off $57 and a runup in July seasonality that impressed our trading team, XLF has only ushered in two September wins in 10 years, with a -3.4% average return. The ETF is headed for a weekly win and is up 26% higher year-to-date, but central bank headwinds could trip up the ETF later in the month.

iShares U.S. Real Estate (IYR)

Real estate doesn’t look like the move for September bulls either, and this will especially be the case if the Fed decides to hike interest rates. IYR has finished a mere two of its last 10 Septembers higher, with a grim average loss of 3.6%. IYR has cast aside its late-July and is now headed for its fifth drop in six sessions, with a year-to-date gain of 9.2%. Maybe the +10% year-to-date level comes into play as a hesitation point later month.

Real Estate Select Sector SPDR (XLRE)

The worst ETF to own in September, XLRE carries a grim 20%-win rate and average loss of 3.7% The ETF is headed for a weekly drop and has consolidated around $44 to start the month. Similar to its sector peer, keep an eye on the +10% year-to-date level.

Long story short, telecom, healthcare, and real estate are best left to the bears for September. But given the larger outperformance of these names across 2026, macro and seasonal headwinds in September could set up some buy-the-dip opportunities for ETF traders to start Q4.