S&P 500's Worst Month of the Year Is Here -- Real Risks Not Vanishing Either

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August was volatile. 

September won't necessarily be any rosier for the S&P 500. 

September Blues

"Since 1950, September has been the worst month for the S&P 500 Index, which has dropped an average of 0.5% during the month," wrote LPL Financial's Senior Market Strategist Ryan Detrick in a Friday note. 

August wasn't without its volatility, which is normal for the month. The volatility index (VIX) , which measures the degree of variance in stock price movements, is above 17 currently (its historical average is closer to 11). Rising risk of a worsening trade war, with tariff threats from both the U.S. and China, mixed with some uncertainty that the market will see two Federal Reserve interest rate cuts, caused stocks to sell off in bouts. Stocks have regained 17.5% year to date. 

While September is typically the worst month of the year for the S&P 500, Detrick noted that in the past 10 years, the index has gained an average of 0.9%. September of 2018 saw largely a flat move on the index, as stocks hit all-time highs. This was just before the stock market would sour as it disagreed with the Fed's decision to raise interest rates, which it did twice in 2018. A selloff to close out that year ensued, preceding the run-up in 2019, a rally that has been so dependent on rate cuts. 

TD Ameritrade Trading Strategy Manager Shawn Cruz said he thinks the S&P 500 will end September "flat to slightly up," as not much will change and some cash may flow into the market. 

Consensus on Stocks Turning Lower

With the S&P 500 up so much, nowhere safe to turn (10 year treasury only yielding 1.5%), and a rising recession risk, investment shops are starting to become cautious. 

The past week UBS CIO of Wealth Management Mark Haefele lowered his equities recommendation to underweight. LPL Financial reduced its S&P 500 earnings per share forecast to $165 from $170. Stifel's Head of Institutional Equity Strategy Barry Bannister said the currently inverted yield curve is signaling a recession will come in May 2020 and that an S&P 500 selloff would anticipate that in December of 2019. 

The point? Be careful right now.