September is historically the worst month for stocks.
If we look back to 1945, the S&P 500 fell more than half the time in September, according to the CFRA, with an average return of -0.73%.
But before you get caught up in seasonal market trends, September may not be as bad as history predicts.
“When interest rates rise more than 10% in the year leading up to a typically unpleasant September, it’s not so bad,” Ryan Detrick, chief market strategist at Carson Group, told Yahoo Finance.
So what could surprise investors and be a positive catalyst for the market? Excitement around artificial intelligence, money on the sidelines, and Apple’s (AAPL) rumored new iPhone could be enough to buck September’s usual downtrend.
The hype around artificial intelligence is fueling the gains
Excitement in the AI space has fueled the market’s rally this year, with AI-related stocks including Nvidia (NVDA), Meta (META), and Microsoft (MSFT) among the market’s best performers.
And it’s not just technology users who benefit from the hype. Companies across various industries have jumped on the bandwagon by mentioning AI in earnings calls, highlighting how AI can transform sectors including travel, healthcare and manufacturing.
And in September, AI could provide a boost to investor sentiment, thanks to upcoming announcements from Microsoft, Meta, and Salesforce (CRM). Both Microsoft and Meta are scheduled to hold events in September to showcase their latest AI innovations, while Salesforce is expected to promote its AI efforts at its annual Dreamforce conference.
“AI is probably not priced in,” Rhys Williams, chief strategist at Spouting Rock Asset Management, told Yahoo Finance about the AI investment opportunity. “The AI story is great now… We’re still in the early stages.”
AI will likely be a topic at Goldman Sachs’ Communacopia & Technology conference in September as well, where leaders in communications, media and technology can provide insight into various AI investments.
Investors hold cash
More investors are holding cash or investing in cash-linked products amid rising interest rates and uncertainty about the Federal Reserve’s monetary policy path.
One strategist said that excess liquidity could help the market regain momentum and achieve further gains.
“With all this fear, I think people are underestimating how much cash is sitting on the sidelines that will have to play catch-up to the poor performance in the first half of the year,” Thomas Hayes, president of Great Hill Capital, told Yahoo Finance.
Total assets in money market funds have risen significantly this year, totaling $5.57 trillion as of August 23, according to the Investment Company Institute.
Read more: Best High-Yield Money Market Accounts for September 2023
Apple’s next product event
Apple’s market cap reaching $3 trillion earlier this year helped the Nasdaq 100 hit a record high in the first half of the year, and given the company’s dominance of stock markets, an impressive lineup of products could be a positive catalyst.
Apple’s next major product is set to be unveiled on September 12 at the tech giant’s headquarters in Cupertino, California. While Apple has not revealed the details, Wall Street expects the company to debut the iPhone 15 as well as the new Apple Watches.
“You see these small increases in enthusiasm in the market,” Johan Grahn, head of ETF strategy at Allianz, told Yahoo Finance. “It may be a tool, or a major push for the product.”
Apple is under pressure to impress at the event. The tech giant snapped its seven-month winning streak in August after iPhone sales fell for the third straight quarter.
While only time will tell whether or not these factors will be enough to reverse the well-known “September Effect,” they do give investors reason to believe there is a chance to surprise markets to the upside.
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