The September Effect
In light of historical trends, September has consistently shown a tendency for stocks to underperform, posing potential implications for currency markets as well. Per the full note from J.P. Morgan, the S&P 500 has declined by an average of 0.6% in September since 1945, making it the worst-performing month for equities. This seasonal phenomenon, driven in part by post-summer rebalancing, raises questions for FX traders about risk sentiment and asset allocation. With no significant calendar events impacting the immediate future, the focus shifts to how these trends may affect investor behavior and positioning in foreign exchange markets.
What the desk is arguing
The desk asserts that the historical declines seen in September for equities could signal a shift in market sentiment that might spill over into currency markets. According to J.P. Morgan, the S&P 500's average drop of 0.6% during this month since 1945 highlights a broader pattern of risk aversion that we may see reflected in currency pairs as investors adjust portfolios.
Investors typically return from summer breaks and may readjust their risk levels, often leading to increased volatility. This potential shift in positioning could impact major currency pairs as traders respond to the turbulence seen in equity markets. Given that September shows a positive return in U.S. stocks only 44% of the time since 1950, caution is warranted going forward.
Where it sits in our coverage
Our current consensus target for the EUR/USD is 1.075, with a range spanning from a low of 1.04 to a high of 1.12. Notable firms include: - J.P. Morgan: 1.10 (Mar26) - BofA: 1.04 (Mar26)
The desk's view aligns closely with J.P. Morgan, which is positioned in the middle of the spread, reflecting broader caution in the market as we enter September.
How other firms see it
Firms such as J.P. Morgan are aligned in expecting cautious sentiment to dominate, whereas BofA adopts a more bearish stance, featuring a lower target. The divergence in targets raises important considerations for FX positioning in the context of equity performance.
Monitoring the correlation between U.S. equities and major pairs like EUR/USD is essential, especially considering potential investor sentiment shifts as September progresses.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01September historically leads to declines in the S&P 500, averaging a drop of 0.6%.
- 02The month has shown only a 44% positive performance rate for equities since 1950.
- 03Currency markets may reflect increased volatility as equities falter.
- 04September could trigger a major reallocation of portfolios across asset classes.
Market implications
Watch for the EUR/USD to react to fluctuations in risk sentiment emanating from stock market performance, particularly as September progresses. A key level to monitor will be 1.075, where a breakout or retracement could signal a broader trend in investor positioning.
Risks to this view
Should equities begin to perform unexpectedly well in September, it may lead to a rapid reversal in FX positioning and risk sentiment. A stronger-than-expected economic report or a change in monetary policy outlook could also undermine this cautious stance.
Why do stocks tend to fall in September? ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ View online Insights In Context * What is the "September effect" in the stock market? * From a buying opportunity in healthcare to the U.S. small cap recovery, discover which calls we got right over the past year -- and what we missed -- in the latest Eye on the Market * Why are global bond yields climbing -- and could this signal a new economic regime? Not a subscriber? Sign up for In Context.
WEALTH MANAGEMENT Why September is historically the worst month for stocks The S&P 500 has fallen by an average of 0.6% in September since 1945, making it the worst-performing month of the year. One explanation may be post-summer rebalancing: As investors return from their summer break and portfolios are refreshed, trading activity can pick up and positioning can change. TAKE STOCK BY THE NUMBERS Ten-year Japanese government bond yields recently hit a 30-year peak, while 10-year German Bund yields rose to levels last seen in 2011.
The S&P 500 has posted a positive return only 44% of the time in September since 1950, making it the only month with a positivity rate below 50%. In contrast, December ranks among the strongest months for stocks, with the S&P 500 rising by an average of 1.6%. PRIVATE BANKING Eye on the Market: Rear window Over the past year, the Eye on the Market has included views on sectors, rates and currencies.
In this back-to-school edition, Asset and Wealth Management's Michael Cembalest offers a post-mortem on each, along with some thoughts on the proposed residential real estate seizures in New York City. LOOK BACK PRIVATE BANKING What's behind the global bond sell-off? At first glance, the sell-off appears to be driven by fears around growing sovereign debt piles -- a market narrative that often permeates in the early autumn.
But this feels different in both margin and motive. WHY THE U-TURN? jpmorgan.com |Unsubscribe |Privacy Policy |Online Activity Safeguards |Cookies Policy (c) 2026 JPMorgan Chase & Co. All rights reserved.
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