September’s volatility is treacherous for traders around the world

September has historically been a challenging month for traders, and 2024 could prove even more difficult due to ongoing uncertainty surrounding the Federal Reserve’s expected interest rate cut.

Bonds, stocks, and gold have historically faced losses in September as traders reevaluate their portfolios after the summer lull. Since 1950, the S&P 500 and Dow Jones Industrial Average have recorded their steepest percentage declines during this month. Bonds have fallen in eight of the past ten Septembers, and gold has dropped consistently every year since 2017.

More turbulence in September

Investors may need to brace for more turbulence this time, with uncertainties looming, such as:
1. Apivotal U.S. jobs report
2. The Fed’s upcoming interest-rate cuts
3. Stocks trading near record highs
4. Treasuries experiencing their longest monthly winning streak in three years
5. Unexpected data shifts or surprises from the closely contested U.S. presidential race

“Fall comes with falls — especially with markets pricing in so much for Fed cuts and people chasing the ‘Goldilocks’ scenario out there,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank in Singapore. “Markets would be more edgy than normal.”

Fresh from a hectic August that featured a brief but brutal global stock rout, investors now look to Friday’s employment data that may shed light on the health of the world’s No. 1 economy and shape the trajectory of the Fed’s upcoming monetary easing campaign.

With a hefty four quarter-point rate cuts currently priced in by the end of this year, there’s heightened risk for wild market swings if the Fed sounds less dovish than expected at its meeting that concludes on Sept. 18.

Bonds, stocks and gold all suffered

Bonds, stocks, and gold have typically faced losses in September as traders adjust their portfolios following the summer break. Since 1950, the S&P 500 Index and Dow Jones Industrial Average have recorded their largest percentage declines during this month. Bonds have fallen in eight of the last ten Septembers, while gold has posted losses every year since 2017.

“September seasonality has a checkered record, with risk-off not uncommon and in election years more dramatic,” Bob Savage, head of markets strategy and insights at Bank of New York Mellon Corp. (BNY), wrote in a note. “There is a sense that the U.S. jobs report ahead will determine the course for the rest of the year.”

The S&P 500 has fallen in each of the last four Septembers and this time the non-farm payrolls data may carry added weight for U.S. stocks.

Investors might need to brace for more turbulence this time, with uncertainties looming, including a critical US jobs report that could influence the scale and timing of the Fed’s future interest-rate cuts. Stocks hovering near record highs and Treasuries on their longest monthly winning streak in three years appear vulnerable to data surprises or shocks from a closely contested US presidential race.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.