ORLANDO, Florida, Sept 2 (Reuters) - Data going back

decades shows that, on average, September is the worst month for

U.S. stocks - and by a considerable margin. So should investors

brace for another bumpy ride this year? Almost certainly, and

not just because of the "September effect."

If the market saying "Sell in May and go away" had any

validity, September would be a bumper month, with investors

returning from their summer holidays eager to buy back stocks

that, presumably, had become cheaper since Memorial Day.

But history suggests the opposite.

Since 1950, the S&P 500's average return in the month of

September is -0.68%, according to Carson Group's Ryan Detrick.

If you round to one decimal place, September is the only month

with an average negative return in the last 75 years.

And there have been more "down" than "up" Septembers over

this period. The S&P 500 has only posted positive returns in

September 44% of the time since 1950, the lowest positivity rate

for any calendar month and the only one below 50%.

And the performance appears to be getting worse. In the last

decade, the S&P 500's average September return has been near

-2%.

TOTAL OUTLIER

There is no obvious explanation for those seasonal factors.

Some analysts point to the looming fiscal year-end, as fund

managers may seek to dump their worst-performing stocks. Others

say tax-related selling is a factor, again because fund managers

are shedding their losing positions, this time to limit or

offset capital gains.

Investor psychology could also be at play. Investors, having

experienced decades of lousy Septembers, may return from their

summer holidays expecting a tough month. This caution can turn

into pessimism, which can lead to selling, resulting in a

self-fulfilling prophecy.

However dubious these explanations may be, the numbers don't

lie. For much of the last century, September has been the

cruelest month for global equity investors.

EYES WIDE OPEN

The stage is set for a particularly rocky September this

year.

Wall Street's main indexes are at or near record highs,

valuations are getting stretched, especially in the tech sector,

and market concentration has never been greater.

True, momentum appears to be on the bulls' side. The S&P 500

and Nasdaq have been up for four and five consecutive months,

respectively. And as the second quarter earnings season wraps

up, nearly 80% of companies have reported profit and revenue

above analysts' estimates, compared with long-term averages of

67% and 62%, respectively, according to LSEG data.

On top of that, investors can likely expect a Federal

Reserve rate cut on September 17, if rates futures market

pricing is accurate.

But all of that is already "in the price," to use traders'

parlance. And Wall Street's momentum is slowing as monthly gains

have steadily diminished over the summer, especially for the

Nasdaq, which rose 1.6% in August compared with 9.6% in May.

What happens next will likely largely depend - like most

things in markets this year - on what happens in the technology

sector. Tech stocks are by some valuation metrics the most

expensive they have been since the dotcom bubble burst 25 years

ago.

Investors appear to have noticed, as they have recently

started rotating out of tech and into cheaper small caps. Given

the record-high market concentration in this sector, a

continuation of this trend could weigh heavily on the broader

market.

So this September could be volatile, at the very least. Past

results are no guarantee of future performance, of course. But

caution is warranted. As Porter Collins, co-founder of Seawolf

Capital, recently posted on X, when markets are this extended,

an "eyes wide open approach" is advisable. With so many

potential catalysts for a correction looming this September,

investors would be wise not to look away.

(The opinions expressed here are those of the author, a

columnist for Reuters)