Wall Street Whipsaw: Stocks Plunge as Alternative Assets Soar
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September’s Slump: A Historical Phenomenon?
When September rolls around, it’s not just the leaves that start falling. T.S. Eliot famously wrote that April is the cruelest month, but on Wall Street, September holds that distinction. According to RBC Wealth Management, data going back to 1928 shows that stocks decline by an average of 1.2% in September.
Theories Behind the Slump Abound
Theories to explain the September slump abound, from institutional investors rebalancing portfolios to decision-makers returning from summer vacation. Market pros don’t put too much stock in any of them, though. They also advise against knee-jerk responses to seasonal fluctuations.
It’s Just a Statistical Quirk
“There’s no fundamental reason why September should be worse. The reality is it was a statistical quirk that’s become a self-fulfilling prophecy with algorithmic trading,” says Ross Mayfield, investment strategist at Baird.
Historical Patterns Show a Correlation
Still, even if this September turns into a bumpy ride for investors, Mayfield points out that a seasonal slump doesn’t necessarily suggest that the market will sour in 2025. What’s more, historical patterns show a correlation between the final few months of the year and market buoyancy.
Momentum Tends to Beget Momentum
“If fall tends to be a rockier time for a market, the end of the year tends to be the best time of the year to be in markets. Our view on financial markets is that momentum tends to beget momentum,” he says.
Investor Sentiment is Downbeat
Recent data showing downbeat investor sentiment also isn’t consistent with a frothy, market-bubble mentality, lending credence to the theory that a tumble would likely be temporary. “I don’t sense a euphoria that would signal we’re at a market top,” Mayfield says.
Why are Investors Piling into Alternative Assets?
While September might be bumpy for stocks, alternative assets are riding a wave of high demand — a trajectory analysts say is likely to persist.
Blame the US Dollar and National Debt
Blame the U.S. dollar’s position as the world’s de facto reserve currency — along with our national debt. Investors anticipate that officials will continue relying on debt issuance to finance government operations and subsequently lower interest rates to make servicing that debt less expensive.
Gold and Other Precious Metals are Soaring
A literal and figurative shining example is gold: The per-ounce spot price of the yellow metal definitively broke the $3,500 barrier for the first time earlier this month and has gained more than 34% this year.
Experts Now Say a September Rate Cut is Most Likely
Experts now say the most likely scenario is a rate cut in September, followed by a second one later this year. About 10% of market observers even expect a super-sized half-percentage point rate cut this month, rather than the more typical increment of a quarter of a percentage point.
Alternative Assets are Gaining Value
Precious metals aren’t the only alternative assets gaining value in this climate. Flagship cryptocurrency bitcoin, along with altcoins like ethereum and even meme coins, have seen strong gains this year.
What You Should Do if Stocks Dip
If you’re wondering what you should do to avoid taking a hit if stocks dip this fall, the answer is simple: nothing that’s not part of your financial plan, according to Baird’s Mayfield.
Don’t Try to Time the Market
While it might be tempting to try timing the market, pros advise against attempting to trade your way out of a slump. Most investors will be best served by being patient and waiting out a seasonal swoon.
Be Cautious of Concentrated Market Exposure
The caveat to this advice is that it applies only if recent market gains have distorted your asset allocations. “This year, you have markets at all-time highs, valuations are high and the market is concentrated,” says Thomas Martin, senior portfolio manager at Globalt Investments.
More from Money:
You Can Thank Everyday Investors for the Continued Bull Market
Are U.S. Stocks Overvalued? Everyday Investors and Experts Disagree
The Stock Market Is at Record Highs. So Why Is Investor Sentiment So Low?
