The worst month in the history of US stocks is here! UBS issues a September seasonality warning.

UBS Group AG recently stated that the strong increase in the U.S. stock market in August 2025 was mainly driven by EPS (earnings per share) revisions. However, as September approaches - historically the most negative seasonal month for the S&P 500 - the market is facing a turning point. The bank warned that despite no signs of economic data slowdown, high positions and reliance on Federal Reserve policy make the market fragile, and investors need to be vigilant about systemic risks. The strongest EPS revision wave since the outbreak of the COVID-19 pandemic has not only pushed up the S&P 500 and Nasdaq 100 indices, but has also significantly impacted assets with imbalanced holdings. Cyclical growth impulses and expectations of Federal Reserve policy further strengthened market optimism. According to a report by UBS Group AG, cyclical indices (compared to defensive indices) are approaching historical highs, reflecting the market's pricing of economic growth impulses. Investor confidence stems from the imminent implementation of the "big beautiful bill" and the past weakness in non-farm employment data. Economic indicators have not shown a substantial slowdown in growth. In addition, Federal Reserve Chairman Powell's dovish signals regarding a rate cut in September have been a key driver. Investors have romanticized a dovish Fed in the backdrop of positive growth, encouraging them to maintain risk exposure. The report noted that attempts to short risk assets have repeatedly failed recently, highlighting the current strong environment. Risks are continuing to accumulate. UBS Group AG particularly highlighted the negative seasonal risks in September, historically the most unfavorable month for the S&P 500. The market is already at historical highs, but seasonal factors usually worsen after mid-September, coinciding with the FOMC meeting, which increases the probability of a correction. Specific risks include: AI-led stocks (such as NVIDIA Corporation) may "rest" after earnings, leading to a lack of market momentum; risks if non-farm employment or CPI data fall below expectations (the bank's economic team expects non-farm employment to be 70,000 in September, below the consensus of 75,000), any doubts about growth figures could trigger a sharp decline in U.S. stocks; positions have reached their highest levels since April, especially for systemic funds, which could easily trigger systemic selling. UBS Group AG's early warning signals no longer show bullish signs, indicating accumulating downside risk. The model predicts an increased probability of a decline of over 5% in the S&P 500 index in the next month. Risk-averse strategies UBS Group AG recommends adopting cautious defensive strategies. Given the impact of low liquidity on price action at the end of August (as many people take vacations), the bank advises reducing risk exposure before the non-farm data is released. Specific strategies include: purchasing put options on the Russell 2000 index (IWM.US) as protection against Friday's data event; buying call options on gold ETFs for October; going long on the software sector instead of the semiconductor sector due to NVIDIA Corporation's weakness.