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September is historically the worst month for stock performance, with the S&P 500 declining in more than half of past Septembers and averaging returns of -0.73% since 1945 according to CFRA. But three key factors — artificial intelligence excitement, excess cash, and Apple’s upcoming iPhone launch — could allow stocks to surprise investors and rally this September against the average seasonal trend.

The market has already gained over 10% year-to-date leading into September, notes Carson Group’s Ryan Detrick. He told Yahoo Finance that when stocks enter September strong, it tends to hold up better than its seasonal weakness.

AI Innovation Sparking Investor Enthusiasm

A major catalyst driving stocks higher this year has been the hype and promise surrounding artificial intelligence (AI) across sectors. Top performers like Nvidia, Meta, and Microsoft are leading AI development, and companies are increasingly touting AI capabilities.

This momentum may persist in September. Microsoft and Meta both have AI-focused events planned where they will unveil the latest innovations in autonomous driving, augmented reality, robotics, and more futuristic tech. Salesforce will also highlight AI progress at its annual Dreamforce conference this month.

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Though some believe AI’s potential is overhyped, its expanding role across industries could support further tech stock gains in September. AI’s total addressable market remains massive.

Excess Cash On Sidelines Poised To Buy Stocks

Huge cash reserves sitting on the sidelines could also propel a September stock rally if some of this cash flows back into equities. Investors piled into cash this year amid high uncertainty, pushing money market fund assets up to $5.7 trillion per August ICI data.

“With all of this fear, I think people are underestimating the amount of cash on the sidelines that has to play catch-up for underperformance in the first half of the year,” said Thomas Hayes of Great Hill Capital.

If September provides greater clarity on inflation peaking and the Fed slowing rate hikes, investors may deploy more idle cash into stocks. Even a small redeployment could lift markets.

Will New iPhones Drive Apple Stock Higher?

Apple’s hotly anticipated September 12th event is expected to unveil its new iPhone 15 line. After Apple shares fell in August, ending a seven-month win streak, the tech giant needs an exciting iPhone launch to boost sales and its stock price.

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Key iPhone 15 upgrades may include enhanced cameras, always-on displays, satellite connectivity for emergency use, and more processing power. But Apple faces intense competition, and inflation leaves consumers with less spending power. The new iPhones will require compelling new features at reasonable prices to stimulate demand. Still, an innovative lineup from the world’s biggest company could improve investor sentiment.

Risks Remain Despite Potential Catalysts

These three catalysts provide potential upside in September, but risks abound. The Federal Reserve remains committed to aggressively raising rates until inflation falls decisively back towards its 2% target. Any surprises in inflation data could heighten volatility.

Global growth fears, midterm election uncertainty, geopolitical tensions like the Russia-Ukraine war, and Covid risks also persist. And September has averaged declines for stocks over the past 75+ years, so seasonal weakness cannot be ignored.

Yet with low expectations already priced in, the right combination of positive inflation signs, dovish central bank shifts, breakthrough technologies, and renewed risk appetite could outweigh bearish seasonal headwinds. Stocks appear oversold, and buyers are waiting to seize on further dips.

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In summary, stocks have potential to rally against seasonal weakness in September, but risks remain high. Investors should prepare for likely volatility while watching for signals that could spark an upside surprise this month.

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