September is historically the worst month for stocks.
Looking back to 1945, the S&P 500 fell more than half the time in September, with an average return of -0.73%, according to CFRA.
But before you get caught up in seasonal market trends, September might not be as bad as history predicts.
“If you’re up more than 10% for the year before the start of the normally difficult month of September, things aren’t going so bad,” Ryan Detrick, chief market strategist at Carson Group, told Yahoo Finance.
So what could surprise investors and be a positive market catalyst? The excitement around AI, cash on the sidelines, and Apple’s (AAPL) rumored brand new iPhone could be enough to counteract September’s usual bearish trend.
AI hype fuels profits
AI enthusiasm fueled the market’s rally this year, with shares of AI-related stocks such as Nvidia (NVDA), Meta (META) and Microsoft (MSFT) being among the market’s best performers.
And it’s not just technology companies that are benefiting from the hype. Companies across industries have jumped on the bandwagon by mentioning AI in earnings calls and highlighting how artificial intelligence can transform industries like travel, healthcare and manufacturing.
And in September, AI could boost investor sentiment thanks to upcoming announcements from Microsoft, Meta and Salesforce (CRM). Both Microsoft and Meta will hold events in September to showcase their latest artificial intelligence innovations, while Salesforce is expected to further highlight 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 possibility of investing in artificial intelligence. “The AI story is great right now. … We’re still in the early innings.”
Artificial intelligence is also likely to be a topic at Goldman Sachs’ Communacopia & Technology Conference in September, where telecom, media and technology executives could provide insight into various AI investments.
The story goes on
Investors hold cash
Given higher interest rates and uncertainty about the Fed’s monetary policy stance, more investors are holding cash or investing in cash-related products.
And excess cash could help the market regain momentum and make further gains, a strategist said.
“With all this fear, I think people are underestimating the amount of cash that needs to be recovered in the first half of the year to offset poor performance,” Thomas Hayes, chairman of Great Hill Capital, told Yahoo Finance.
According to the Investment Company Institute, total money market fund assets have increased dramatically this year, reaching $5.57 trillion as of August 23.
Read more: The Best High Yield Money Market Accounts for September 2023
Apple’s upcoming product event
Apple’s rise in market value to $3 trillion earlier this year helped the Nasdaq 100 post record first-half results, and given the company’s dominance of the stock market, an impressive product lineup could be a positive catalyst.
Apple’s next major product launch is scheduled for September 12 at the tech giant’s headquarters in Cupertino, California. And although Apple hasn’t revealed any details, Wall Street expects the company to unveil its iPhone 15 as well as new Apple Watches.
Apple CEO Tim Cook takes a look at a new iPhone 14 Pro during a special Apple event on September 7, 2022 in Cupertino, California. (Justin Sullivan/Getty Images)
“You see these little bursts of enthusiasm in the market,” Johan Grahn, head of ETF strategy at Allianz Investment Management, told Yahoo Finance. “It could be a gadget, a premium product boost.”
Apple is under pressure to impress at its event. The tech giant snapped its seven-month winning streak in August after iPhone sales fell for a third straight quarter.
Only time will tell whether these factors will be enough to reverse the well-known “September effect”. However, they give investors reason to believe that markets could be in for a positive surprise.
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