\n Wealth managers are wrapping up their summer and getting ready for the historically choppy trading season that starts in September.\n <\/p>\n
Summer is almost over. September is almost here and the Wall Street workweek will return to normal. Sigh.<\/p>\n
Then again, the \u201cSeptember Effect\u201d will also be arriving and that means financial advisors better get ready for some anxious calls from clients.<\/p>\n
The so-called September Effect refers to the historically weak stock market performance often observed during the month of September. The S&P 500 has, on average, posted negative returns in September since 1950, a phenomenon attributed to institutional investor behavior, fiscal year-end activities, seasonal market psychology and a few notable historical events such as the collapse of Lehman Brothers in 2008.<\/p>\n
September<\/a> has delivered the lowest average monthly returns with some analyses showing a decline of about 0.5% to 0.7% on average, making it the year\u2019s worst performing month.<\/p>\n Tim Holland, chief investment officer at Orion, is respectful of market history and the September effect, noting that while markets go up much more than they go down, there is often a seasonal dynamic to equity returns.<\/p>\n \u201cI think it is less important that investors believe or do not believe in the September effect – or the January effect or “Sell in May and go away” – but are aware of such patterns and how those patterns might impact investor sentiment and investor behavior short-term,\u201d Holland said.<\/p>\n Despite his respect for the seasonality of markets, he has no plans to tweak client portfolios as we head into September.<\/p>\n \u201cWe are comfortable with how the portfolios that we are responsible for are allocated today, including our neutral weight to US equities, and we remain cautiously optimistic on US markets as we move into year-end, encouraged by better than expected Q2 earnings results, the likely stimulative impact of the One Big Beautiful Bill Act and greater clarity concerning trade and tariff policy,\u201d Holland said.<\/p>\n Elsewhere, Stephen Kolano, chief investment officer at Integrated Partners, won’t argue with the data that says September, on average, tends to be a negative month for the S&P 500.\u00a0But like Holland, he is not repositioning portfolios ahead of September. In his opinion, the time horizon of one month is much too short in relation to long term financial goals and disciplined investing.\u00a0<\/p>\n Additionally, he notes that while September historically has been a tough month for the S&P 500, the historical data also points to October through December being a seasonally strong period of the year for the S&P 500. And it is a period that leads into the proverbial \u201cSanta Claus Rally\u201d often driven by the pick-up in consumer spending associated with holiday shopping.\u00a0<\/p>\n Tom Graff, chief investment officer at Facet, however, rejects the idea of the September effect entirely.<\/p>\n \u201cIt is certainly true that some big events have happened in September, such as the Lehman bankruptcy and 9\/11. If you just look at how often September is negative versus other months, there’s no significant difference,\u201d Graff said.<\/p>\n A September to remember?\u00a0<\/p>\n
\u201cMarket volatility could be elevated as we move into and through September for a few reasons, including that US equities largely trade at higher-than-average multiples; if the expected rate cut at the Fed\u2019s September meeting is called into question; uncertainty around the Fed\u2019s makeup, including the President\u2019s effort to fire Fed Governor Lisa Cook and a still unsettled geo-political construct,\u201d Holland said.<\/p>\n
\nWhether or not one believes in the September effect, it\u2019s hard to deny that this coming September is shaping up to be one to remember.<\/p>\n