As September approaches, it’s not just the vibrant fall foliage that starts to emerge. T.S. Eliot may have called April the cruelest month, but on Wall Street, September takes that title. According to RBC Wealth Management, historical data dating back to 1928 indicates that stocks typically decline by an average of 1.2% during this month, making it a noteworthy time for investors.
Theories regarding the cause of the September slump vary widely, ranging from institutional investors rebalancing their portfolios to decision-makers returning from summer breaks. However, market experts generally advise against placing too much emphasis on these theories. They strongly recommend maintaining a level-headed approach and avoiding impulsive reactions to seasonal market fluctuations.
“There’s no fundamental reason why September should be worse,” stated Ross Mayfield, an investment strategist at Baird. “The reality is that it’s a statistical quirk that has transformed into a self-fulfilling prophecy, primarily driven by algorithmic trading practices.”
Even if this September presents challenges for investors, Mayfield emphasizes that a seasonal downturn doesn’t necessarily indicate that the market will experience a downturn in 2025. In fact, historical trends often reveal a strong correlation between the final months of the year and market resilience.
“If fall is typically a rougher season for the market, the end of the year frequently emerges as the most favorable time for investors,” he explains. “Our perspective on financial markets is that positive momentum tends to generate further positive momentum.”
Recent data reflecting negative investor sentiment further indicates that there is no indication of a market bubble, supporting the idea that any downturn could be temporary. “I don’t detect any signs of euphoria that would suggest we’ve reached a market peak,” Mayfield observes.
What Drives Investor Interest in Alternative Assets?
While September may present challenges for traditional stocks, there is a notable surge in demand for alternative assets, a trend that analysts predict will continue. “We anticipate this movement to persist in the coming years,” states Christian Magoon, CEO of Amplify ETFs, in an email to Money.
The driving forces behind this trend can be attributed to the dominance of the U.S. dollar as the world’s primary reserve currency and the escalating national debt. Investors foresee that authorities will continue to depend on debt issuance to fund government activities, leading to lower interest rates to ease the burden of servicing that debt. “These strategies encourage investors to acquire assets that remain insulated from devaluation by central banks,” Magoon adds.
A prime example of this trend is gold: The spot price per ounce of this precious metal has recently surpassed the significant threshold of $3,500 for the first time this month, marking an impressive increase of over 34% this year alone. Analysts attribute this spike to cautious investors seeking alternatives to bonds in anticipation of upcoming Federal Reserve rate cuts, a sentiment heightened by the weak jobs report released in August that hints at potential inflationary pressures.
Experts now predict that a rate cut is imminent in September, with a second cut likely by the year’s end. Approximately 10% of market analysts even expect a substantial half-percentage point rate cut this month, surpassing the usual quarter-point reduction. The futures market indicates an 80% probability of rates declining by at least 75 basis points this year, doubling the expectations prior to the jobs report.
“Gold is a global reflection of fiscal concerns and the prevailing belief that inflation will not be curbed,” explains David Stubbs, chief investment strategist at AlphaCore Wealth Advisory. Gold has traditionally served as a hedge against inflation, and rising inflation diminishes the purchasing power of bond yields.
Additionally, products related to gold, such as gold-backed exchange-traded funds (ETFs), have experienced significant inflows due to these market sentiments. Silver has also capitalized on this trend, showing an impressive increase of approximately 42% this year.
However, precious metals aren’t the only alternative assets witnessing a surge in value during this period. The flagship cryptocurrency bitcoin, along with other altcoins such as ethereum and even meme coins, has demonstrated substantial growth this year. Although bitcoin has retreated from its record high of nearly $125,000 in August, analysts remain optimistic about continued strong demand for this asset class.
“Both [bitcoin and ethereum] are positioned to challenge new record highs before the year concludes,” says Joel Kruger, a strategist at LMAX Group, in comments to Barron’s.
Experts are quick to note that cryptocurrency occupies a unique space among alternative assets due to its extreme volatility and lack of inherent value. The evolving regulatory environment—and its growing acceptance in Washington—also serves as a significant advantage for this asset class.
“The shift in regulatory tone has been monumental,” Stubbs remarks.
How Can Ordinary Investors Navigate the Market?
If you find yourself contemplating how to safeguard your investments against potential stock market declines this fall, the answer is straightforward: adhere to your established financial plan, as advised by Baird’s Mayfield. “This is a time when you should anticipate increased volatility, but I never recommend making decisions solely based on seasonal trends,” he asserts.
While the temptation to time the market may be strong, financial professionals caution against attempting to trade your way out of a downturn. Most investors will benefit more from exercising patience and weathering any seasonal declines. “It’s crucial to incorporate this into your expectations,” Mayfield advises. “Exiting the market is likely the wrong strategy.”
The only exception to this guidance is if recent market gains have skewed your asset allocations. “This year has seen markets reach all-time highs, with valuations soaring and the market becoming increasingly concentrated,” notes Thomas Martin, senior portfolio manager at Globalt Investments. “Investors should critically assess their positions and ask themselves, ‘Am I genuinely diversified?’”
Having an excessive portion of your portfolio concentrated in tech-heavy growth stock funds might expose you to greater risks if earnings fail to meet these stocks’ inflated valuations. “When that segment of the market experiences a downturn, it tends to be more severe and abrupt,” he warns.
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