September is historically the toughest month for stocks, and this year’s outlook is complicated by the Federal Reserve’s anticipated rate cut.
Seasonality, the predictable rhythm of markets, offers traders an edge.
- Stocks typically struggle in september, declining in four of the last five years.
- gold’s record is even weaker, falling in eight of the last ten Septembers.
- The U.S. dollar often gains strength, rising in seven of the past ten Septembers.
Seasonality, the study of recurring market patterns tied to the time of year, is a powerful yet often overlooked trading advantage. For prop traders, who live by monthly performance, understanding these calendar-driven trends can make a notable difference.
Why Markets Follow a Calendar
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Markets aren’t random walks.They’re shaped by predictable forces like earnings reports, fiscal year-ends, tax deadlines, and central bank announcements. These events drive capital flows, leaving consistent footprints in price data year after year. seasonality provides a framework to anticipate shifts in market pressure, risk, and prospect.
Trading in alignment with seasonal flows feels like catching a favorable current. Fighting against it can be like running uphill. If an asset tends to decline in September,there’s usually a reason-profit-taking after summer gains,capital reallocations,or caution before the fourth quarter.
For prop traders focused on account preservation and consistent track records, seasonality is a vital risk management tool.
September: A Challenging Month for Equities
September holds the dubious distinction of being the worst-performing month for stocks, not just recently but over decades. In the past 10 years, it’s been the only month to consistently show a meaningful decline in U.S. equities. The last five years reinforce this trend,with stocks dropping in four out of five Septembers,often with significant speed and depth.
This year adds another layer of complexity. The Federal Reserve is expected to make its first rate cut of 2025, a move that typically boosts stocks. However, much of this optimism may already be priced in. If the Fed cuts rates but signals caution about future moves due to inflation concerns, investors could be disappointed, potentially leading to a repeat of September’s seasonal weakness.
Gold’s Seasonal Vulnerability
Gold,frequently enough seen as a safe haven,is not immune to September’s downward pressure.Its record in this month is even weaker than that of stocks. Over the last decade, gold prices have fallen in eight of the last ten Septembers.
