Stocks are at all-time highs, but the toughest month for the market looms

“September and October have some pretty bad reputations in the market, but especially September,” said Tim Courtney, chief investment officer at Exencial Wealth Advisors. “You’re always wary to say things are going to be cheery heading into historically tough parts of the year for markets.”

Wall Street will likely kick off September with equities trading at, or near, all-time highs. The S&P 500 and Nasdaq both hit record highs on Tuesday. Meanwhile, the Dow traded less than 2 percent from its record high.

U.S. equities got a boost after the U.S. and Mexico struck a trade deal that paves the way for a replacement for NAFTA, the current deal that includes those two countries and Canada. Trade fears kept a lid on stock gains prior to August as investors assessed the potential effects of more protectionist policies from the U.S. and its biggest partners.

The almanac’s data show September has kicked off strongly in 14 of the past 23 years, but those gains faded quickly. “As tans begin to fade and the new school year commences, fund managers tend to clean house as the end of the third quarter approaches, causing some nasty selloffs near month-end over the years,” said Jeffrey Hirsch, editor of “Stock Trader’s Almanac,” in a note last week.

Investors could also experience added volatility in September as a U.S. midterm election looms. The Dow and Nasdaq’s average losses for September widen to 1 percent and 0.8 percent, respectively, in midterm election years. The S&P 500’s losses improve slightly to an average of 0.4 percent, however.

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