Navigating September Stock Trends: A Historical Glimpse and What Lies Ahead

As August sunsets with stocks showing a tad tiredness, the looming question for traders and investors remains: Will September prove its historical reputation for being, let's say, a tad slippery for the stock market?

Historically, September has delivered a negative 0.73% monthly return for the S&P 500 (^GSPC), making it the most challenging month on record since 1945, according to CFRA's chief investment strategist, Sam Stovall. This is akin to that one student in class who, despite all efforts, just can't seem to ace the test. For the tech-heavy Nasdaq (^IXIC), the September blues have been a consistent theme since 1971.

Stovall playfully christens this phenomenon "September's slippery slope." It's as if the stock market took the phrase "fall is coming" a tad too seriously. As of Monday's close, the Dow Jones Industrial Average (^DJI), S&P 500, and Nasdaq have already shown a taste of this trend with respective losses of around 3%, 3.4%, and 4.5%.

Carson Group's chief market strategist, Ryan Detrick, provides some insights into this, suggesting that the better the stock market's performance leading into August, the more challenging September can be. It's like having a great party only to be met with a cleanup the next day. However, Detrick optimistically reminds us that "we're not just going to crash in September." Instead, a minor pullback, especially in the AI sector, might be a healthy market correction after a stellar run in the first half of the year.

Speaking of AI, the earnings release from Nvidia (NVDA) was the talk of the town last week. While it showcased a promising financial performance, the excitement was short-lived, proving once again that in finance, what goes up (quickly) can come down (equally quickly). This was compounded by Federal Reserve officials leaning more towards hawkish sentiments.

The current market forecast indicates a near 20% chance of the Fed raising rates in their upcoming September meeting. Post-Jackson Hole, these odds have considerably shifted from a mere 38% chance by November's end. Stovall anticipates the September 20th FOMC meeting might be the wild card that keeps markets in suspense.

But let's not pull out our umbrellas for the rest of 2023 just yet. Despite the September Stock Trends, Detrick believes in the resilience of the economy, forecasting a robust fourth quarter. In his words, "Historically, fourth quarters are strong." So, while September may have its historical quirks, it might just be the prelude to a grand finale for 2023.