September Is Historically the Worst for Stocks. Here Are Warning Signs the Rally Could Lose Steam.

If history is any guide, September is historically the worst month of the year for stocks.

It has risen less than 45% of the time over that period, also the worst month by that measure.

The reason for the "September effect" is unclear but typically this month lacks major corporate earnings news that could push stocks higher, according to Jay Hatfield from Infrastructure Capital Advisors.

So far this year, investors have weathered high inflation, a decline in corporate earnings and a possible recession. But there are warning signs that this year's rally could lose steam, including:

The S&P 500 is trading at around 19 times forward earnings estimates. The one-year average is 17.7 times.

The 10-year Treasury yield is at its highest level in nearly a year, making it less attractive to hold stocks instead of bonds.

Some bears think it is too soon to say the risk of a recession has faded. "We've just been through the most aggressive hiking cycle in my career. It's a bit presumptuous to think we've felt all those effects," said Rob Williams from Sage Advisory Services.

So far in August, the S&P 500 is down 2.4%. The information technology sector, this year's best performer, is down about 4.3%. The artificial-intelligence enthusiasm that has powered tech stocks higher could also sputter.

Nvidia will report quarterly results on Aug. 23 and the end of earnings season soon after could create a void of good news until the fall.