The weekly. Time for a Spring clean. Prepare for market changes. Sep 2, 2024

September has been sour over the last four years too, with the S&P 500 falling between 3.9% and 9.3% in the month, while the ASX200 has shed between 2.7% and 7.3% in September.

Gold usually shines and rallies in September, rising on average 1% during the month over the last 30 years or 0.94% on average in September over the last 40 years. Historically, gold has pulled back in October before recovering in November, rising 0.9% on average over the last 40 years.

It's a US election year (election on Nov 5), and there is the prospect of the Fed reducing interest rates (at the FOMC meeting on Sept 17-18). So, we have a set of ingredients pointing to possibly heightened volatility from September to early to mid-November. Will September be volatile and markets sour as they have historically, or will stock markets buck the trend and rally? Time will tell.

Over the last 30 years, we’ve seen capital put back into the stock market, with investors buying the dip, which has forced markets off their ‘bottoms’ and caused a standing ovation in October. On average, the S&P 500 has gained 1.6% in October over the last 30 years before carving out the best month of the year for the US in November, with the S&P 500 rising 2.3% on average, followed by a 1.1% gain in December. Australian shares have historically recouped September losses and gained back ground in October and November (with the market rising 0.6% and 0.7% on average in October and November, respectively) before surging 1.6% in December as the Santa rally is unleashed.

Investment professionals often rebalance portfolios (make some important changes) in September, as end-of-quarter rebalancing typically takes place toward month-end. This is when money managers bring portfolios into alignment. This often means taking profits from stocks and sectors that have done well, maybe buying downside protection, and purchasing safe havens such as gold. We also usually see investment managers keep money on the sidelines to get ready to ‘buy the potential dip’.

Consider downside protection and de-risking. That could mean a couple of things. Perhaps buying puts via options that become profitable if the market falls. Maybe consider buying safe havens such as gold, which traditionally rallies during uncertainty and when the Fed cuts rates.

Or perhaps you want to consider locking in some gains, i.e., reducing holdings and putting some of those profits aside so you can ‘buy the dip’ into stocks you like, purchasing them at cheaper prices should markets correct (fall). If history repeats itself, you could be handsomely rewarded if markets rally in November and December.