September (and Q3) ETF Review
September was a very challenging month for bonds and did challenge stocks too, especially smaller ones. The S&P 500 slipped during the month, but it did gain during Q3, as I discuss below. It is not on track to return 20% or more this year, and this would break the three-year big-gains streak.
The Market
July was a rough month, but after a very strong August, large-cap stocks did retreat in September. The S&P 500 has returned 12.7% with dividends included, and the price is up 11.8% for SPDR S&P 500 ETF (SPY) in 2026 so far. This leaves the market on track to post a return for the full year just below 17%. At the same time, iShares Core US Aggregate Bond ETF (AGG) has declined in price in 2026. With dividends included, the return has been -2.8%, which is negative and well below cash.
The big mover in September was bonds, and AGG fell 2.6%, including dividends. SPY returned -0.3% during the month, but IWM returned -5.2%. 5 ETFs returned more than 5%, including SOXX, SMH, XNTK, IBIT and XLK, while six returned less than -7%, including GDX, SLV, PEY, XSW, XLB and XLF.
Looking at the quarter, there were two double-digit declines, XLU and SOXX. The strongest ETFs included IBIT, IGV, XLE, GDX and XSW, all up more than 10%. SPY returned 2.4%, while AGG returned -3.5%.
Looking at the 11 sectors for large-caps, Energy leads the way, returning 40.3% so far in 2026, while Technology has been close, returning 36.5%. They are the only two sectors that have outpaced the S&P 500. Four sectors have had negative total returns, including Communication Services, Financials, Utilities and Consumer Discretionary, which has dropped 8.3%.
While this month was very challenging for small-caps, IWM has outpaced SPY, returning 13.7%. MDY now trails. Value continues to outpace Growth.
Here are the returns and a lot of other information about the 90 ETFs that I now follow closely (after adding FALN and XNTK):
I am attaching my data for the ETFs that I follow sorted alphabetically (readers can change the sort if they download the file):
The Model Portfolio
With an emphasis on TIPS, which have not performed well, and a focus on smaller stocks, the model portfolio had a tough month and a bad quarter. The year-to-date performance is now modestly worse than the benchmark:
The model portfolio has still had a positive return. It is positioned well for large-cap equities to move lower, as the three equity ETFs have smaller capitalization than the S&P 500 and have better and more defensive exposures. TIPS are the full exposure of the ETF, and TIPS are very cheap relative to regular Treasuries. Corporates and mortgages have narrow spreads to those Treasuries.
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