September ETF Outlook — 5 Data-Driven Picks for the Month Ahead

TrendWell Digest’s model highlights QQQ, SPY, IJJ, IJT, and DIA for the coming month. Across more than 20+ years of history (dataset beginning October 2000), when the same sets of drivers aligned or better, this basket delivered an average historical annualized return of 22%, versus materially lower results when the signals were weaker.

Markets finished last month firm as core inflation eased, the Fed held rates steady, long-dated Treasury yields drifted lower, and labor data cooled at the margin. Sector leadership rotated—defensives such as XLP and XLV were soft, while large-cap growth remained resilient. These macro undercurrents map closely to the drivers below.

QQQ | Invesco QQQ Trust

Tracks: Nasdaq-100 mega/large-cap technology.

• Materials momentum stretched (RSI of XLB at 137% of its 14-month norm). This type of overbought reading in XLB has historically preceded rotation back into long-duration tech. When XLB looked this stretched, QQQ went on to return 30% annually on average, versus 6% when it didn’t.
• Small-cap volatility mildly elevated (IJR 12-month stdev at 104% of its history). A pickup in IJR volatility often pushes flows toward higher-quality mega-cap tech. In those regimes, QQQ posted 26% annualized, versus 5% otherwise.
• Positive price momentum in QQQ itself (QQQ RSI at 149% of its 14-month norm). Momentum persistence favors trend leaders; when QQQ’s RSI has been this strong, forward returns averaged 23%, versus 2% when momentum faded.

SPY | SPDR S&P 500 ETF

Tracks: Broad U.S. large-cap equities.

• Healthcare softness (XLV six-month change −8%). Weak XLV often signals risk-on breadth and improved margins in cyclical pockets of the S&P 500. In similar setups, SPY returned 28% vs 6% when XLV was stronger.
• Small-cap value volatility near typical levels (IJS 12-month stdev 101% of history). A stable backdrop in IJS supports steady multiple expansion in large caps. SPY returned 19% when this condition held, vs 3% otherwise.
• Falling intermediate yields (DGS5 12-month change −63%). Lower 5-year Treasury yields reduce discount rates and historically support broad equities; SPY returned 12% vs 8% when DGS5 was rising.

IJJ | iShares S&P Mid-Cap 400 Value

Tracks: U.S. mid-cap value stocks.

• Healthcare underperformance (XLV six-month change −8%). When defensive XLV lags, cyclicals in IJJ tend to re-rate on improving risk appetite. That backdrop aligned with 48% annualized for IJJ, vs 6% otherwise.
• Materials stretched (RSI of XLB at 137% of 14-month norm). Overbought XLB has historically preceded leadership rotation into value-tilted industrials/financials inside IJJ; returns averaged 24% vs 4% when XLB wasn’t stretched.
• Flat manufacturing payrolls (LNU01300000 three-month change 0%). A pause in factory hiring can ease wage pressure and boost cash-flow visibility for cyclicals. IJJ returned 18% in these periods, vs −7% when payrolls were accelerating.

IJT | iShares S&P Small-Cap 600 Growth

Tracks: U.S. small-cap growth stocks.

• Healthcare softness persists (XLV six-month change −8%). Risk rotation out of XLV historically benefits higher-beta small-cap growth; IJT returned 46% vs 6% when XLV rose.
• Materials overbought (RSI of XLB at 137%). When commodity-sensitive XLB is extended, capital often pivots to growth beta; IJT returned 25% vs 4% otherwise.
• Defensives off their highs (XLP at 47% of its 52-week peak range). A depressed XLP reading is consistent with investors favoring offense over defense; IJT returned 23% vs 6% when XLP was closer to its peak.

DIA | SPDR Dow Jones Industrial Average

Tracks: 30 U.S. blue-chip industrials.

• Healthcare lagging (XLV six-month change −8%). When XLV trails, cash-generative industrials in DIA tend to see relative strength; historical return 30% vs 5% when XLV outperformed.
• Materials stretched (RSI of XLB 137%). Overbought XLB has coincided with subsequent mean-reversion toward industrial quality; DIA returned 18% vs 3% when XLB wasn’t extended.
• Front-end yields mid-range (DTB3 ~49% of its 52-week peak range). A non-restrictive 3-month T-bill backdrop historically supports steady multiples for blue-chips; DIA returned 13% vs −1% otherwise.

Why these five—now

Last month’s combination of easing inflation, a steady Fed, softer intermediate yields (DGS5), and defensive-sector underperformance (XLP, XLV) aligns with our signal mix: stretched XLB momentum, subdued-to-stable small-cap volatility (IJR, IJS), and favorable rate dynamics. Together, those conditions historically supported large-cap growth leadership (QQQ), broad large-caps (SPY), and cyclically tilted mid/small-cap baskets (IJJ, IJT, DIA).

We’ll continue to keep the analysis clear and data-first—and we hope your portfolio continues to TrendWell.