September’s Market Jitters vs. The Bull’s Staying Power
September is known as the market’s “problem child.” History shows it’s the only month with consistently negative average returns. But should investors hit the panic button? Not necessarily.
Here’s the big picture:
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Bull markets bend the rules. Seasonal weakness often means short-term pullbacks, not lasting damage.
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The Fed is shifting gears. With inflation cooling and jobs slowing, rate cuts are back on the table.
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Tariffs add noise. But many of the recent price bumps are likely temporary.
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Markets are already looking ahead. Six rate cuts are priced in by 2026—a potential tailwind.
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September: The Market’s “Problem Child”
Seasonality matters in markets, and September has historically been the toughest month of the year. Since 1950, it’s been the only month with consistently negative average returns across multiple time frames. Even in post-election years, when volatility can be elevated, September stands out as especially choppy.
This doesn’t mean investors should run for the exits. In fact, during strong bull markets, seasonal weakness often results in nothing more than a short-term breather. That’s exactly where we stand today: after four consecutive monthly gains and a 30% rally since April, the market is overdue for consolidation. A pullback, if it comes, may simply reset the stage for higher highs later in the year.
The Fed’s Balancing Act: Inflation vs. Growth
The Federal Reserve is balancing two competing forces:
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Sticky inflation—core inflation hovers near 3%, still above the Fed’s 2% target.
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Cooling jobs—slower hiring raises concerns about growth.
At Jackson Hole, Chair Jerome Powell opened the door to a rate cut as early as September. For investors, that’s constructive: lower rates reduce borrowing costs and support asset valuations.
Tariffs and Inflation: A Temporary Bump?
Recent inflation pressures have been complicated by tariffs. Durable goods such as appliances, electronics, and furnishings have seen upward price moves linked to trade policies. Without tariffs, core goods prices might actually be declining—a natural disinflationary force.
The Fed and many analysts view this as transitory. Once trade policy stabilizes, these pressures should fade. The real concern is services inflation, which makes up more than half of the Fed’s preferred PCE inflation index. Elevated costs in healthcare, travel, and other service sectors remain harder to tame.
Investors should distinguish between short-term tariff noise and long-term structural inflation drivers.
Markets Already Betting on Six Cuts
Here’s the headline: markets expect the Fed funds rate to fall from 4.4% to under 3% by late 2026. That’s six quarter-point cuts in just 16 months.
Why so aggressive?
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Slower growth & softer jobs.
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Political pressure to ease conditions.
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Recognition that restrictive policy can’t last forever.
For equities, this outlook is bullish: lower rates boost earnings, sentiment, and cyclical sectors like housing.
What This Means for Long-Term Investors
- Expect bumps, not breakdowns. September volatility is normal, but it doesn’t derail the broader bull market.
- Stay invested. Market timing around seasonal weakness often backfires; missing even a few strong recovery days can meaningfully erode long-term returns.
- Focus on fundamentals. Rate cuts, fiscal stimulus, and continued consumer demand provide a positive backdrop for equities.
- Diversify across asset classes. Equities may benefit most, but fixed income could also rally as rates decline.
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What’s New Under OBBA
The recently passed One Big Beautiful Bill Act (OBBA) reshapes how much state and local tax (SALT) you can deduct on your federal return—especially if you live in high-tax states like New Jersey or New York.
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Bigger deduction starting in 2025: The SALT cap rises from $10,000 to $40,000 if your income is $500,000 or less.
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Gradual phase-out: If your income is between $500,000 and $600,000, the benefit shrinks as income rises. Above $600,000, the cap drops back to $10,000.
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Temporary relief: The new rules only run through 2029, unless Congress extends them.
Why It Matters
For many families, this change makes itemizing deductions worthwhile again, since property taxes, state income taxes, mortgage interest, and charitable gifts can combine for a larger write-off.
But for higher earners in the $500k–$600k “phaseout zone,” the cap shrinks quickly. That hidden tax can raise bills unexpectedly, making proactive planning essential.
Key Callout: If your household income is in the $500k–$600k range, the shrinking deduction could quietly erase part of your tax break.
The Bottom Line
The SALT changes under OBBA bring meaningful relief for many households, but also added complexity for high earners. And because these rules sunset after 2029, there’s a limited window to maximize benefits.
We’ll be reviewing these changes with you in upcoming meetings so you can make the most of the opportunity while avoiding pitfalls.
Learn More About OBBA
The SALT deduction changes are just one part of the sweeping One Big Beautiful Bill Act. To explore how OBBA impacts retirement planning, charitable giving, and more:
👉 Read our full OBBA blog here »
Conclusion: Eyes on the Big Picture
Yes, September has a bad reputation. Yes, inflation remains a thorn in the Fed’s side. But context matters: we are still in a bull market, and policy winds are shifting toward support rather than restraint.
For disciplined investors, short-term volatility should be seen as an opportunity to rebalance portfolios, reinvest dividends, and capture long-term growth. History may say September is tough—but this bull has proven it’s tougher.
Knowledge is Power!
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Investment Management: Our globally diversified, tax-efficient portfolios are designed for resilience across market conditions.
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Proactive Tax Planning: We focus on tax-efficient strategies for both accumulation and distribution phases, helping you manage liabilities.
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Contact AWM today to schedule a confidential consultation and connect with an advisor who can help you achieve your financial goals. For assistance, reach out to us at Service@awmfl.com.
Thank you for your continued trust and engagement.
Tony Gomes, Author, MBA
CEO and Founder
Advanced Wealth Management
Content Disclosure: The information here is general and educational. It is not a substitute for professional advice and does not constitute a recommendation. Forecasts and opinions are subject to change.
