Is a September Selloff Coming? The ETFs Traders Are Secretly Monitoring
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Aug 29 2025
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Source: Benzinga
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.
Analyst Views on TLT
Wall Street analysts forecast TLT stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for TLT is USD with a low forecast of USD and a high forecast of USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
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About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
