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Introduction: Why September Gets Investors’ Attention
If you have followed the markets for a while, you may have heard that September has a reputation as one of the most challenging months for stocks. This year is no exception. As of early September 2025, hedge funds are approaching the markets with caution, and concerns about fragility are on the rise. Despite a recent rally in U.S. equities, many professional investors are staying on the sidelines, lowering their leverage, and watching retail investor exposure climb to unusually high levels [1].
When participation is heavily tilted toward individual investors, the market can become more vulnerable to sudden swings. If a wave of selling starts, it can accelerate quickly. That is one reason why professionals are concerned about the potential for a self-reinforcing downturn if sentiment shifts abruptly [1].
Understanding why this happens and how to prepare your financial plan for volatility is essential. Let’s explore the history, the current signals, and the practical steps you can take to help keep your plan on track.
Why September Can Be Volatile
September is often viewed as a seasonally weak month for equities. Historically, the S&P 500 has delivered lower average returns in September compared to other months [2]. While seasonal trends are never a guarantee, there are some recurring reasons why September tends to be more turbulent:
1. Market Dynamics After Summer
• Trading volumes are lower during the summer months, and September often marks a return to full activity. This can bring sharper moves as investors reposition portfolios.
• Corporate earnings announcements generally slow down in the summer and pick up again in the fall, adding new information to the market mix.
2. Behavioral Factors
• After a summer rally, some investors take profits in September, leading to selling pressure.
• Mutual funds and other large investment vehicles may rebalance portfolios before the fiscal year ends, adding to volatility.
3. Current Conditions in 2025
• Hedge funds are reportedly cautious and reducing leverage, signaling that professionals are not fully committed to the recent rally [1].
• Retail participation is high, which can amplify volatility if market sentiment changes quickly.
What Experts Are Saying About 2025
In addition to the historical seasonal pattern, analysts are pointing to some unique factors this year:
• Caution among institutional investors: Hedge funds have cut their exposure and appear hesitant to chase the rally [1].
• Concentration of risk among retail investors: Retail equity exposure is elevated, increasing the risk of sharp reversals [1].
• Recommendations to diversify: Some experts suggest overweighting gold and international bonds to reduce dependence on U.S. equities during this period [2].
The message is not about predicting a crash, but about preparing your financial plan so it can withstand possible turbulence.
How to Prepare Your Financial Plan for Volatility
Financial planning is about being proactive rather than reactive. You cannot control market moves, but you can control how well-prepared your portfolio is for different environments. Here are several strategies to consider:
1. Revisit Your Asset Allocation
Your mix of stocks, bonds, and cash should align with your time horizon and risk tolerance. During times of increased volatility, this step becomes even more important.
• Check for overconcentration: If your portfolio has become heavily weighted toward U.S. equities after recent gains, it may be time to rebalance.
• Consider alternative asset classes: Assets like gold or international bonds may provide diversification benefits when U.S. stocks are under pressure [2].
2. Maintain a Long-Term Perspective
Market downturns can be unsettling, but they are a normal part of investing. Historically, investors who stay invested and avoid emotional decisions tend to fare better over time.
• Avoid making major allocation changes based solely on short-term forecasts.
• Focus on your financial goals, such as retirement or income planning, rather than day-to-day headlines.
3. Review Liquidity and Cash Reserves
Having an adequate cash buffer can reduce the need to sell investments during a downturn. This is particularly important for those approaching retirement or drawing income from their portfolio.
• Aim to keep emergency savings and near-term cash needs in stable, liquid accounts.
• If you anticipate large expenses in the next year, consider setting those funds aside now.
4. Stress-Test Your Plan
Consider how your financial plan would perform under different scenarios, such as a 10% or 15% market decline. A financial professional can help evaluate these situations and make adjustments if necessary.
5. Stay Informed but Avoid Overreacting
While it is important to stay aware of market trends, daily monitoring can lead to emotional decisions. Establish a review schedule and stick to it.
What About Gold and International Bonds?
Some analysts are recommending overweighting gold and international bonds during this period of uncertainty [2]. Why these two?
• Gold: Often viewed as a stable asset during periods of volatility, gold can act as a hedge when equities decline.
• International Bonds: These can provide diversification benefits and reduce reliance on U.S. interest rate and economic trends.
However, these should be considered as part of a broader allocation strategy, not as standalone bets. Diversification works best when assets with different risk profiles and return drivers are combined efficiently.
Putting It All Together
Volatility is a normal part of investing, and seasonal patterns like September’s historical weakness can add an extra layer of uncertainty. While no one can predict the exact outcome for this month, being prepared is key.
Here are the key takeaways:
• Understand the seasonal context: September has historically been challenging for equities.
• Recognize current conditions: High retail exposure and cautious institutional positioning may contribute to fragility this year [1].
• Focus on what you can control: Review allocation, maintain liquidity, and stress-test your plan.
• Consider diversification opportunities: Assets like gold and international bonds can provide balance in uncertain times [2].
If you would like to review your financial plan, consider working with a qualified financial professional. They can help ensure your strategy aligns with your goals and risk tolerance, regardless of what the markets do in the coming weeks.
Sources
1. Reuters, “Hedge funds still cautious on U.S. stocks going into fragile September,” September 2, 2025.
2. Advisor Perspectives, “Playing the Odds in August and September,” August 18, 2025.
3. Morningstar, “September is Historically the Worst Month for Stocks,” September 1, 2025.
Disclosures:
Neither the companies of OneAmerica Financial, Fuller Financial, nor their representatives provide tax or legal advice. For answers to specific questions and before making any decisions, please consult a qualified attorney or tax advisor.
Provided content is for overview and informational purposes only and is not intended and should not be relied upon as individualized tax, legal, fiduciary, or investment advice. Investing involves risk which includes potential loss of principal. Past performance is not a guarantee of future results.
The use of asset allocation or diversification does not assure a profit or guarantee against a loss.
