Is a September Selloff Coming? The ETFs Traders Are Secretly Monitoring
September Market Trends
- Historical Performance: September has historically been a bearish month for Wall Street, with the S&P 500 index falling over 50% of the time and averaging a decline of more than 1.2%.
- Current Market Conditions: The current risk levels are heightened due to a 17% rise in stocks since May, valuations nearing dot-com bubble levels, and high exposure from hedge funds and quant strategies.
ETF Dynamics
- SPY Performance: The SPDR S&P 500 ETF Trust (SPY) has increased nearly 10% since June, contrasting with broad bond ETFs that have either dipped or remained flat. This outperformance may lead to selling pressure as pensions and mutual funds rebalance their portfolios.
- Bond ETF Inflows: Investors may seek refuge in bond ETFs like the iShares Core U.S. Aggregate Bond ETF (AGG) and iShares 20+ Year Treasury Bond ETF (TLT), potentially leading to inflows as equity positions are extended.
Defensive Strategies
- Low Volatility ETFs: Defensive strategies, including the Invesco S&P 500 Low Volatility ETF (SPLV) and iShares MSCI USA Min Vol Factor ETF (USMV), may attract cash as traders look for stability in sectors like utilities and staples.
- Hedging Activity: Increased hedging activity suggests that volatility-linked ETFs, such as the ProShares VIX Short-Term Futures ETF (VIXY) and ProShares Ultra VIX Short-Term Futures ETF (UVXY), could gain traction during market downturns.
Investor Behavior
- Market Participation: Retail participation typically declines in September, while institutional rebalancing is expected to intensify, positioning ETFs as a key tool for navigating market volatility.
- Tactical Investment Options: Tactical investors may consider inverse ETFs like ProShares Short S&P 500 (SH) and ProShares UltraShort S&P 500 (SDS) to profit from or hedge against market declines without liquidating stock positions.
Conclusion
- Market Outlook: As September approaches, the combination of historical trends, current market conditions, and investor strategies indicates that ETFs will play a crucial role in how investors respond to potential volatility, making this month particularly challenging for the market.
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FED'S GOOLSBEE: INTEREST RATES COULD DECREASE, BUT INFLATION PROGRESS IS ESSENTIAL
- Federal Reserve's Goals: The Federal Reserve aims to manage interest rates effectively to combat inflation.
- Current Economic Outlook: While rates can still decrease, there is a need for visible progress in reducing inflation.
Could a Partial Government Shutdown Occur This Weekend?
Senate Vote Outcome: The U.S. Senate failed to advance a funding bill for the Department of Homeland Security, with a vote of 52 to 47, falling short of the 60 votes needed for passage.
Impact of Funding Delay: The lack of funding is expected to lead to a partial shutdown of the DHS, affecting essential workers, particularly those in the Transportation Security Administration at airports.
Democratic Opposition: Democrats blocked the bill due to disagreements over immigration enforcement measures, insisting on significant changes before agreeing to any funding.
Market Reactions: Following the vote, U.S. equities declined, with various ETFs tracking major indices showing losses, indicating a bearish sentiment in the market.
Americans Suffer the Most from Trump's Tariffs, According to NY Fed Report
Tariff Increase: The average tariff rate on U.S. imports rose significantly from 2.6% to 13% in 2025, primarily due to tariffs imposed during Trump's first term, which were not offset by price cuts from foreign exporters.
Economic Burden: U.S. businesses and consumers bore the majority of the economic burden from these tariffs, with nearly 90% of the tariff costs being shouldered by Americans, leading to increased import prices.
Impact on Supply Chains: The higher costs prompted companies to adjust and reorganize their supply chains, as they faced rising expenses due to the tariffs.
Market Status: Concurrently, U.S. equities experienced declines, with major ETFs tracking the S&P 500 and other indices showing significant drops, indicating a bearish sentiment in the market.
Peter Schiff Disagrees with Trump's Claim That Tariffs Fueled US Wealth in the 1880s and 1890s – Offers Advice on Achieving Wealth Again
Economic Strategy Proposal: The Economist outlines a roadmap to restore U.S. wealth akin to the 1880s by proposing the elimination of 90% of federal government agencies, except for essential programs like Social Security and Medicare.
Critique of Government Spending: Peter Schiff argues that the U.S. was wealthier in the late 19th century due to minimal government spending, which was only about 2% of GDP, compared to over 23% today.
Call for Federal Law Repeal: Schiff advocates for the repeal of nearly all federal laws enacted since 1900 to facilitate a return to a tariff-based economy, similar to the prosperous era of the 1880s and 1890s.
Concerns Over Global Economic Impact: Schiff highlights President Trump's comments on other countries benefiting at the expense of the U.S. economy, suggesting that if these practices continue, it could lead to increased prices and interest rates for American consumers.
Bessent Supports Potential Senate Investigation of Powell Over DOJ as Republicans Aim to Overcome Senator Tillis' Resistance: Report
GOP Lawmakers' Compromise: GOP lawmakers view a proposal to investigate Federal Reserve Chair Jerome Powell as a compromise and an attempt to placate Senator Thom Tillis, who has expressed opposition to President Trump's nominee for the position.
Tillis' Stance on Investigation: Senator Tillis has stated he will oppose any Federal Reserve nominee until the Department of Justice's inquiry into Powell is resolved, emphasizing the importance of protecting the Fed's independence from political interference.
Federal Reserve Renovation Probe: The investigation into Powell is centered around a $2.5 billion renovation project for the Federal Reserve's Eccles Building, which has raised concerns about potential misconduct.
Market Reactions: In the context of the ongoing investigation, U.S. equities showed gains, with various ETFs tracking the S&P 500 and Treasury bonds experiencing slight increases, indicating a mixed sentiment in the market.
Could the US Government Close on Valentine's Day? Insights from Prediction Markets
Democrats' Stance on ICE Reform: Senate Democrats, led by Chuck Schumer and Hakeem Jeffries, refuse to support another stopgap funding measure for the Department of Homeland Security without an agreement on ICE reforms, citing the agency's negative impact on communities.
Recent Violence Linked to ICE: The letter from Schumer and Jeffries highlights the tragic deaths of two U.S. citizens in Minneapolis due to actions by federal immigration agents, emphasizing the need for reform to prevent further chaos in communities.
Potential Government Shutdown: The U.S. government is facing a potential partial shutdown, coinciding with Valentine's Day, as negotiations over funding and immigration reform remain unresolved.
Call for Bipartisan Agreement: Schumer expresses optimism about reaching a bipartisan agreement on ICE reforms before the deadline, urging Republican leaders to collaborate on legislative solutions.
FED'S GOOLSBEE: INTEREST RATES COULD DECREASE, BUT INFLATION PROGRESS IS ESSENTIAL
- Federal Reserve's Goals: The Federal Reserve aims to manage interest rates effectively to combat inflation.
- Current Economic Outlook: While rates can still decrease, there is a need for visible progress in reducing inflation.
Could a Partial Government Shutdown Occur This Weekend?
Senate Vote Outcome: The U.S. Senate failed to advance a funding bill for the Department of Homeland Security, with a vote of 52 to 47, falling short of the 60 votes needed for passage.
Impact of Funding Delay: The lack of funding is expected to lead to a partial shutdown of the DHS, affecting essential workers, particularly those in the Transportation Security Administration at airports.
Democratic Opposition: Democrats blocked the bill due to disagreements over immigration enforcement measures, insisting on significant changes before agreeing to any funding.
Market Reactions: Following the vote, U.S. equities declined, with various ETFs tracking major indices showing losses, indicating a bearish sentiment in the market.
Americans Suffer the Most from Trump's Tariffs, According to NY Fed Report
Tariff Increase: The average tariff rate on U.S. imports rose significantly from 2.6% to 13% in 2025, primarily due to tariffs imposed during Trump's first term, which were not offset by price cuts from foreign exporters.
Economic Burden: U.S. businesses and consumers bore the majority of the economic burden from these tariffs, with nearly 90% of the tariff costs being shouldered by Americans, leading to increased import prices.
Impact on Supply Chains: The higher costs prompted companies to adjust and reorganize their supply chains, as they faced rising expenses due to the tariffs.
Market Status: Concurrently, U.S. equities experienced declines, with major ETFs tracking the S&P 500 and other indices showing significant drops, indicating a bearish sentiment in the market.
Peter Schiff Disagrees with Trump's Claim That Tariffs Fueled US Wealth in the 1880s and 1890s – Offers Advice on Achieving Wealth Again
Economic Strategy Proposal: The Economist outlines a roadmap to restore U.S. wealth akin to the 1880s by proposing the elimination of 90% of federal government agencies, except for essential programs like Social Security and Medicare.
Critique of Government Spending: Peter Schiff argues that the U.S. was wealthier in the late 19th century due to minimal government spending, which was only about 2% of GDP, compared to over 23% today.
Call for Federal Law Repeal: Schiff advocates for the repeal of nearly all federal laws enacted since 1900 to facilitate a return to a tariff-based economy, similar to the prosperous era of the 1880s and 1890s.
Concerns Over Global Economic Impact: Schiff highlights President Trump's comments on other countries benefiting at the expense of the U.S. economy, suggesting that if these practices continue, it could lead to increased prices and interest rates for American consumers.
Bessent Supports Potential Senate Investigation of Powell Over DOJ as Republicans Aim to Overcome Senator Tillis' Resistance: Report
GOP Lawmakers' Compromise: GOP lawmakers view a proposal to investigate Federal Reserve Chair Jerome Powell as a compromise and an attempt to placate Senator Thom Tillis, who has expressed opposition to President Trump's nominee for the position.
Tillis' Stance on Investigation: Senator Tillis has stated he will oppose any Federal Reserve nominee until the Department of Justice's inquiry into Powell is resolved, emphasizing the importance of protecting the Fed's independence from political interference.
Federal Reserve Renovation Probe: The investigation into Powell is centered around a $2.5 billion renovation project for the Federal Reserve's Eccles Building, which has raised concerns about potential misconduct.
Market Reactions: In the context of the ongoing investigation, U.S. equities showed gains, with various ETFs tracking the S&P 500 and Treasury bonds experiencing slight increases, indicating a mixed sentiment in the market.
Could the US Government Close on Valentine's Day? Insights from Prediction Markets
Democrats' Stance on ICE Reform: Senate Democrats, led by Chuck Schumer and Hakeem Jeffries, refuse to support another stopgap funding measure for the Department of Homeland Security without an agreement on ICE reforms, citing the agency's negative impact on communities.
Recent Violence Linked to ICE: The letter from Schumer and Jeffries highlights the tragic deaths of two U.S. citizens in Minneapolis due to actions by federal immigration agents, emphasizing the need for reform to prevent further chaos in communities.
Potential Government Shutdown: The U.S. government is facing a potential partial shutdown, coinciding with Valentine's Day, as negotiations over funding and immigration reform remain unresolved.
Call for Bipartisan Agreement: Schumer expresses optimism about reaching a bipartisan agreement on ICE reforms before the deadline, urging Republican leaders to collaborate on legislative solutions.
