September is historically the worst month for stocks.
Looking back to 1945, the S&P 500 has declined more than half the time in September, according to 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 predicts.
“When you’re up over 10% for the year going into the normally troublesome month of September, it doesn’t do as poorly,” Carson Group chief market strategist Ryan Detrick told Yahoo Finance.
So what could surprise investors and be a positive market catalyst? Excitement around AI, cash on the sidelines, and Apple’s (AAPL) rumored brand-new iPhone may be enough to buck September’s usual downward trend.
AI hype fuels gains
AI excitement fueled the market’s rally this year, with shares of AI-related stocks including Nvidia (NVDA), Meta (META), and Microsoft (MSFT) among the market’s best performers.
And it’s not just tech players benefiting from the hype. Companies across industries have jumped on the bandwagon by mentioning AI on earnings calls, highlighting how artificial intelligence can transform sectors including travel, healthcare, and manufacturing.
And come September, AI could offer a boost to investor sentiment, thanks to upcoming announcements from Microsoft, Meta, and Salesforce (CRM). Microsoft and Meta are both set to hold events in September to show off their latest innovations in artificial intelligence, while Salesforce is expected to further tout AI efforts at its annual Dreamforce conference.
“AI is probably not priced in,” Spouting Rock Asset Management chief strategist Rhys Williams told Yahoo Finance about the opportunity to invest in artificial intelligence. “The AI story is terrific right now. … We’re still in the early innings.”
Artificial intelligence will likely be a theme at Goldman Sachs’ Communacopia & Technology Conference in September too, where leaders across telecoms, media, and technology could give insight on various AI investments.
Investors holding cash
More investors are holding cash or investing in cash-related products amid higher rates and uncertainty over the Fed’s path of monetary policy.
And excess cash could help the market regain momentum and drive further gains, one strategist said.
“With all of this fear, I think people are underestimating the amount of cash on the sidelines that has to play catch-up for underperformance in the first half of the year,” Great Hill Capital chairman Thomas Hayes told Yahoo Finance.
The total assets in money market funds have risen dramatically this year, totaling $5.57 trillion as of Aug. 23, according to the Investment Company Institute.
Read more: The best high-yield money market accounts for September 2023
Apple’s upcoming product event
Apple’s run to $3 trillion in market value earlier this year helped the Nasdaq 100 post a record first half of the year, and given the company’s dominance in equity markets, an impressive lineup of products could be a positive catalyst.
Apple’s next major product unveiling is set for Sept. 12 at the tech giant’s headquarters in Cupertino, Calif. And while Apple has not disclosed details, Wall Street is expecting the company to debut its iPhone 15 as well as new Apple watches.
“You see these small spikes of enthusiasm in the market,” Allianz Investment Management head of ETF strategy Johan Grahn told Yahoo Finance. “It might be a gadget, a prime product push.”
Apple is under pressure to impress at its event. The tech giant snapped its seven-month win streak in August after iPhone sales declined for the third quarter in a row.
While only time will tell whether or not these factors will be enough to upend the well-known “September effect,” they give investors reason to believe there’s a chance markets could surprise to the upside.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance