September is often a tough month for financial markets, especially for stocks. Over the past 20 years, the S&P 500 has historically struggled in September, making it the worst month on record. Although the market had poor performances from 2020 to 2023, the S&P 500 gained about 2% last year. This year, all eyes are on the Federal Reserve’s decision on September 17, with traders expecting a 25 basis point rate cut. The U.S. labor market report and U.S. consumer price index (CPI) report will play a big role in shaping these expectations. The Nasdaq and MSCI World Index also tend to face challenges in September. Gold usually performs poorly too. In fact, it’s the second worst month for gold over the last 20 years, with prices dropping in eight of the last ten Septembers. However, gold has done well recently and didn’t follow the usual trend in 2024. Oil prices also struggle in September, which falls in the middle of a weak period lasting from August to October/November. Last year continued this trend. Therefore, market participants should keep historical patterns in mind when evaluating commodities and stocks this September. Given that September is typically the worst month for the S&P 500, we should be careful about taking too many risks. The VIX volatility index is currently around a low of 13.5. Buying some inexpensive protective puts or VIX calls could be a smart way to hedge against long positions. This strategy could help shield us if the usual September patterns hold true, especially after the strong rally we saw in 2024 that broke a four-year losing streak for this month. The key event will be the Federal Reserve meeting on September 17, so we will focus on volatility around important data. We are closely watching this Friday’s jobs report and the CPI data on September 11. With fed funds futures reflecting a 90% chance of a rate cut, any surprise decision to keep rates steady could shock the market, making some low-cost out-of-the-money options a potential lottery ticket play. We also need to take gold’s historical performance into account. September has been its second worst month, with prices falling in eight of the last ten years. Since 2005, gold’s average September return has been a negative 1.2%. Although it defied this trend during the 2024 rally, the safest approach might be to look for chances to sell into strength or buy puts. Finally, the seasonal trend for oil points to weakness as we move from the peak summer driving season into fall. The latest Energy Information Administration report highlighted a surprise increase in crude inventories, indicating softening demand. This suggests it might be time to consider short positions in futures or buy puts on oil ETFs if prices can’t maintain important technical support levels in the coming days.

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