Attention! The US stock market will enter the "most dangerous month of the year" next week.

With the U.S. stocks falling on the last trading day of August, some market participants are beginning to feel anxious as signs of unsustainability in the bull market are starting to show - market darlings like Nvidia and other artificial intelligence related stocks were leading the decline in Friday's market. Soon, they may face another factor to worry about: the September seasonal "curse"... Next week, investors will enter what has historically been the "most dangerous month" for the U.S. stock market - historically, as institutional investors adjust their positions, retail trader buying slows down, volatility rises, and corporate buybacks enter a quiet period, the U.S. stock market tends to perform particularly poorly in September! Bank of America analyst Paul Ciana cited data dating back to 1927, indicating that the S&P 500 Index has a 56% probability of declining in September, with an average decline of 1.17%. In a president's first year in office, the probability of a decline in the benchmark index in September reaches 58%, with an average decline of 1.62%. Looking back on recent experience, this September "curse" has actually occurred several times. As shown in the graph below, in the past decade (2015-2024), the S&P 500 index has fallen six times in September, with an average decline of 1.93%, the worst of all months. Among them, there is even a "miserable" case of a single month plummet of 9.34% in September 2022. Autumn of Challenges From a news perspective, the U.S. stock market in September this year is undoubtedly facing a challenging autumn. A series of macro events may have a decisive impact on market direction: investors will have to deal with the latest non-farm employment report and two inflation data releases, followed by the Federal Reserve's highly anticipated monetary policy decision. At the same time, President Trump continues to threaten the independence of the central bank and calls for a substantial rate cut. In recent weeks, market effects caused by Trump's policies have once again begun to show up in the U.S. bond market. Investors expecting the Fed to cut interest rates have been snapping up two-year U.S. Treasury bonds, leading to a decline in short-term bond yields. Investors expecting inflation and long-term debt costs to rise, on the other hand, have been selling off 30-year U.S. Treasury bonds, pushing up long-term bond yields. Data from the Dow Jones market shows that the spread between two-year and 30-year bond yields - a key component of the yield curve - has reached its highest level since early 2022. The 30-year U.S. bond yield closed at 4.872% on Friday, gradually approaching the 5% mark. Lawrence Gillum, chief fixed-income strategist at LPL Financial, said, "This level often disrupts the stock market." Meanwhile, the rotational phenomenon within the U.S. stock market has also made some investors anxious. Areas of the market that have been relatively weak lately are now showing up in companies that were previously leaders - companies that provide chips, servers, and other tools for the prosperity of artificial intelligence. Nvidia fell 3.4% on Friday, becoming one of the biggest decliners in the blue-chip index, as its stock accelerated its decline since concerns arose about slowing demand growth for artificial intelligence following the company's earnings report. Dell Technologies also fell about 8.9% on that day, after the company's profit forecast was below expectations, implying weak server sales profitability. Rebalancing Considering that the S&P 500 index has surged 17% since early May, bulls could face a particularly vulnerable situation in September. The current U.S. stock valuation (forward price-to-earnings ratio) has reached 22 times expected earnings, close to the level of the late stages of the dot-com bubble. Algorithmic traders who use trend-following strategies and ignore fundamentals have nearly reached their limit in their allocation to U.S. stocks. Strategists including Emmanuel Cau at Barclays Bank pointed out that hedge funds' equity holdings have recently reached the 80th percentile, and positions are at risk of excessive expansion. Some market participants are worried that there may be selling pressure when pension funds and mutual funds rebalance their portfolios at the end of the quarter (end of September). ETFs tracking the S&P 500 index have risen nearly 5% since the end of June, while bond ETFs have fallen nearly 2%. This outperformance of stocks over bonds may compel investors to sell stocks during rebalancing. Mutual fund analyst David Cohne pointed out that some mutual funds may also start rebalancing their portfolios earlier at the end of this fiscal year (end of September), selling underperforming stocks or locking in profits. He said large funds typically exit positions slowly to avoid market disruption, and such operations may begin next month. Retail investors may also slow down their buying frenzy in September. Data from Citadel Securities dating back to 2017 shows that after strong performances in June and July, retail buying activity has already begun to weaken in August, with September typically being the lowest point in retail participation for the year. In addition, U.S. companies, as one of the largest buying groups in the market, may also be forced to reduce share buybacks before third-quarter earnings reports are released. Undercurrents Another concern for investors is that based on industry data dating back to the 1990s, September and October are usually months of rising volatility. The historical average of the Chicago Board Options Exchange's volatility index (VIX) is usually around 20. The index closed at 15.36 points on Friday. "A simultaneous decrease in volatility across all assets is a sign of complacency," said Peter van Dooijeweert, Director of Strategic Investments at Capstone Investment Advisors. "The Fed seems to be under tremendous pressure from the government, and the impact of tariffs on the economy in the next 12 months remains uncertain. Considering the many uncertainties in the future, the market seems too relaxed." Options market positioning shows that traders are currently becoming cautious about short-term trends. The spread between 10-delta put options and 40-delta put options - which reflects the cost difference of hedging against sharp declines and slow declines - has risen to its highest level in the year. Chris Murphy, Co-Head of Derivatives Strategy at Susquehanna International Group, pointed out, "We have seen a lot of hedging activity for September and October, highlighting the market's cautious attitude toward short-term downside risks." This article was reprinted from Financial Association, GMTEight Edition: Li Fo.