September is historically the worst month for stocks.
If we look back to 1945, the S&P 500 was down 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 might not be as bad as history predicted.
“When interest rates go up more than 10% in the year leading up to a typically horrible September, it’s not bad,” Ryan Dietrick, chief market strategist at Carson Group, told Yahoo Finance.
So what can surprise investors and be a positive catalyst for the market? Excitement around AI, money on the sidelines, and Apple’s (AAPL) rumored new iPhone might be enough to counteract the usual September downtrend.
Hype around artificial intelligence fueled the gains
Excitement in AI has fueled the market rally this year, with AI-related stocks including Nvidia (NVDA), Meta (META), and Microsoft (MSFT) among the best performers in the market.
And it’s not just tech users who benefit from the hype. Companies across 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). Microsoft and Meta are scheduled to hold events in September to showcase their latest AI innovations, while Salesforce is expected to boost its AI efforts at the annual Dreamforce conference.
“AI may not be priced in,” Rhys Williams, chief strategist at Spouting Rock Asset Management, told Yahoo Finance about the AI investment opportunity. “The story of artificial intelligence is great now…we’re still in the first innings.”
AI will likely be a topic at Goldman Sachs’ Communacopia & Technology conference in September as well, where leaders in communications, media and technology can offer 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 path of the Federal Reserve’s monetary policy.
One strategist said that excess liquidity could help the market regain momentum and make further gains.
“With all this fear, I think people underestimate how much cash on the sidelines has to play catch-up 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 dramatically this year, totaling $5.57 trillion as of Aug. 23, according to the Investment Firm Institute.
Read more: The best high-yield money market accounts for September 2023
Apple’s next product event
Apple’s $3 trillion market capitalization earlier this year helped the Nasdaq 100 index set a record high in the first half of the year, and given the company’s dominance of the stock markets, an impressive lineup of products could be a positive catalyst.
Apple’s next major product unveiling is scheduled for September 12th at the tech giant’s headquarters in Cupertino, California. While Apple did not disclose the details, Wall Street expects the company to debut the iPhone 15 in addition to 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 could be a tool, or a major boost to 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 if these factors will be enough to overturn the well-known “September Effect” or not, they do give investors reason to believe that there is an opportunity to surprise the markets to the upside.
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