INSIGHTS

On September 14, 2026

AAM Viewpoints - Seasonal Volatility Could Present Opportunity

Rapid rotation has remained a dominant stock market characteristic and one that prevailed through the summer session. August was an unsettled and dynamic month for stocks and yet it produced few expansive trading swings with the market largely range bound. In certain ways the rotational behavior has proven constructive by efficiently addressing prominent price and sentiment excesses – most notably among technology stocks – without causing meaningful disruption to the overall market. In fact, the major stock indices held at or near their widely watched short-term moving average trendlines. There were sharp drops in semiconductor stocks that denoted hair-trigger technical selling. I do not believe such actions present primary warning signs or a fundamental change in leadership. Rather, they reflect a skittish and reactive investment climate.

Timing market turbulence is a dicey undertaking, especially when there is already broad recognition that September and October are historically challenging months. The market seldom accommodates consensus wisdom or forecasts and there seems to be expectations on both Wall Street and Main Street that seasonal crosscurrents could deliver a sizable downdraft for stocks. September began with no evident resolutions on a variety of critical issues – the Iran war, the Federal Reserve Board’s monetary stance, the economy and, of course, the consequences of the mid-term elections. All of this makes an arguably good case for an overdue correction. However, even if the major indices violate their respective short-term support levels, it is my contention that the subsequent retreats may only be in the range of 3% to 5%. The underlying market foundation is fortified by deep and diverse sector and theme participation. Also, the stock market has established an impressive track record of durability and elasticity following setbacks over the years.

There is a nagging issue apart from seasonal and cyclical headwinds. The CBOE Volatility Index (VIX) continues to live in the lower extremities of its longer-term range which reflects a high degree of investor complacency as the major indices remain in somewhat narrow trading corridors. In itself, this is not necessarily troubling, but it does imply that the market could be highly vulnerable if a negative catalyst were to emerge, thereby triggering a sudden and disconcerting retreat. This might launch the so-called ‘fear index’ well into the 20’s. If such a development were to occur, heightened anxiety could sufficiently rein in lofty expectations. The VIX does not stand alone as a measure of prevailing complacency. Recent weekly sentiment readings released by the American Association of Individual Investors (AAII) have shown that market psychology has vacillated only moderately for many weeks. There have not been big swings in bullish or bearish sentiment, indicating the possibility that investor psychology is stuck in neutral. Something may have to give before sustainable higher ground can be achieved.

With expectations for downward seasonal and cyclical pressures on stocks, the conventional wisdom might be to ‘wait it out’ and see if a significant decline develops. I would not necessarily subscribe to this tactic. Rotation has actually benefitted several sectors that had fallen behind for years. Developing bullish trends could indicate long-term gains ahead for heretofore out of favor sectors such as Agriculture and Health Care. I also believe that this is an important time to regard the longer-term uptrends and take advantage of seasonal and cyclical hiccups to initiate or add to positions in core leaders including Consumer Discretionary, Financials, Industrials, Materials and Technology. I believe market conditions continue to favor a ‘time in’ investment approach. Anxiety about September and October may be warranted but it could also be an opportunity for long-term investing.

CRN: 2026-0910-13786 R