September is historically the worst month for stocks.
Looking back to 1945, the S&P 500 fell by more than half in September, according to CFRA, which returned an average of -0.73%.
But before you get caught up in current market trends, September may not be as bad as history predicts.
“When you’re over 10% in September, which is typically a stressful month, it doesn’t do that well,” Ryan Detrick, chief market strategist at Carson Group, told Yahoo Finance.
So what could surprise investors and spur positive market sentiment? Excitement around AI, cash on the side, and Apple’s ( AAPL ) rumored new iPhone may be enough to buck September’s usual downward trend.
AI hype fuels profits
AI excitement has fueled the market’s rally this year, with AI-related stocks including Nvidia ( NVDA ), Meta ( META ) and Microsoft ( MSFT ) among the market’s best performers.
And it’s not just tech players who will benefit from the announcement. Companies across industries have jumped on the bandwagon, citing AI on earnings calls and showing how artificial intelligence will transform sectors including travel, healthcare and manufacturing.
And in September, AI could provide a boost to investor sentiment, thanks to recent announcements from Microsoft, Meta and CRM. Microsoft and Meta are both set to hold events in September to showcase their latest innovations in artificial intelligence, while Salesforce is expected to further strengthen its AI efforts at its annual Dreamforce conference.
“AI is probably not worth it,” Rhys Williams, chief strategist at Spouting Rock Asset Management, told Yahoo Finance about the prospect of investing in artificial intelligence. “The story of AI right now is pretty scary… we’re still in the early stages.”
Artificial intelligence is likely to be the theme at the Goldman Sachs Communicopia & Technology conference in September, where leaders in telecom, media and technology can offer insight into various AI investments.
Investors hold cash
Many investors are holding cash or investing in cash-linked products amid high rates and uncertainty over the path of the Fed’s monetary policy.
And excess cash could help the market revive and generate further gains, a strategist said.
“With all this fear, I think people are underestimating the amount of money on the upside to underperform in the first half of the year,” said Thomas Hayes, chairman of Great Hill Capital.
Total assets in money market funds have risen sharply this year, reaching a total of $5.57 trillion as of Aug. 23, according to the Investment Company Institute.
Read more: The best high income money market accounts for September 2023
Apple’s upcoming product event
Apple’s move to a $3 trillion market cap earlier this year helped the Nasdaq 100 hit a record for the first half of the year, and the company’s impressive product lineup could be a positive sign given its dominance in equity markets.
Apple’s next major product was unveiled on September 12 at the tech giant’s headquarters in Cupertino, Calif. And while Apple hasn’t revealed the details, Wall Street is expecting the company to launch the iPhone 15 and a new Apple Watch.
“You see these small spurts of enthusiasm in the market,” Johan Grahn, head of ETF strategy at Allianz Investment Management, told Yahoo Finance. “A gadget, it could be a major product push.”
Apple is under pressure to impress at the event. The tech giant ended its seven-month winning streak in August after iPhone sales declined for the third quarter in a row.
While only time will tell whether these factors will be enough to fuel the so-called “September Effect,” they give investors reason to believe the markets could be surprised.
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