The markets have been throwing one hell of a summer party. The S&P flirts with record highs, tech stocks are channeling 1999 (but with actual earnings this time... well, mostly), and investors keep whistling past the graveyard while Jerome Powell repeatedly warns he isn't done inflicting economic pain.
But there's something in the air now. That first crisp financial breeze that signals summer's end.
I've been fielding calls all week from clients using that tone I recognize immediately—outwardly casual but with an undertone of nervousness—asking if perhaps we should "revisit our exposure." Translation: "I'm freaking out but trying to sound sophisticated about it."
And ya know what? They might be onto something.
September has historically been absolute poison for equities—a fact that seasoned Wall Street types acknowledge with the same resigned shrug my grandmother gives when discussing New England heating bills. It just is what it is.
But this September? Different animal entirely. Not merely seasonally dangerous but fundamentally... twitchy.
Let me break this down.
First, the macro picture is—and I'm being generous here—a hot mess. We're stuck in this weird economic purgatory, neither obviously recessing nor healthily growing. Consumer spending keeps surprising analysts, but dig beneath those headline numbers and you'll find credit card balances stretching like spandex at a buffet while savings rates thin alarmingly. That resilience narrative? Starting to show serious cracks.
Meanwhile, rates remain high enough to make your eyes water. The bond market (which, let's be honest, is usually the smarter cousin in the financial family) isn't buying the "Fed's about to pivot" fairy tale that equity markets have been pricing in since... well, forever. That yield curve is doing things that historically precede trouble, not champagne celebrations.
Then there's earnings. Good lord. The current optimism feels increasingly unmoored from reality. Q2 wasn't a disaster, sure, but have you listened to the guidance calls? Companies are practically begging analysts to lower expectations without actually saying it. The forward P/E ratios we're seeing require the kind of earnings growth that would make even the most cocaine-addled 1980s Wall Street optimist raise an eyebrow.
Geopolitically? Pick your poison. Middle East tensions simmering, the Russia-Ukraine conflict grinding on, and U.S.-China relations that could generously be described as "complicated." Any single flashpoint could cascade into broader market implications faster than you can say "risk-off."
And let's not forget September's special little challenges this year—a Fed meeting where Powell will likely remind everyone (again) that inflation remains above target, potential government funding drama as fiscal year-end approaches (because Congress never disappoints in the drama department), and markets needing to digest all the position-building from a summer of FOMO trading.
Look, I've covered market corrections since the dot-com bubble. They never announce themselves with a courtesy call. They just show up—uninvited and hungry.
So what's an investor to do? Panic selling is dumb. Always. But so is sticking your head in the sand like some financially oblivious ostrich.
The middle path makes sense. Take some profits where you've had ridiculous gains—that's not panic, that's just math. Tighten stops on your more speculative positions. Maybe—just maybe—build a modest cash reserve to give yourself both sleeping pills and tactical flexibility when volatility inevitably spikes.
Having watched countless clients over twenty years, I can tell you nothing reveals your true risk tolerance like watching your portfolio drop 15% in three weeks. That theoretical "I can handle volatility" conviction tends to evaporate faster than spilled beer on a hot sidewalk.
I'm not suggesting heading for the financial bunker—market timing is a fool's errand played expertly by absolutely no one. But there's acres of reasonable territory between doing nothing and liquidating everything.
After all, markets have this peculiar habit of punishing both the complacent and the paranoid. The sweet spot? Respecting September's historical bad attitude without letting it dictate a complete investment overhaul.
As my old trading desk mentor used to say between cigarettes (back when you could still smoke indoors): "When markets feel this nervous, don't try to be a hero. Heroes look great at parties and terrible at funerals."
September's coming, folks. Maybe wear a helmet.
