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Market volatility fell to the lowest level this year on Wednesday. The CBOE SPX Volatility Index VIX dropped to an intraday low below 14.50, a level not seen since December 2024. This follows a large channel lower in the VIX since it spiked to a high above 60 back in April. Looking toward the ½-point chart, we can see that yesterday’s move breaks a spread -septuple bottom. The VIX reached 15 on six previous occasions but did not move lower, four times in January to February, then two more times over the past month before Wednesday’s low.

Just last week, we discussed how August opened up with a 21% “spike” in the VIX, after the S&P 500 Index SPX dropped about 2% on the first day of the month. As that piece highlighted, it is normal to see a slight increase in volatility after such a prolonged period of calm. We did not see a single day in July where the S&P 500 moved 1% in value, up or down. Then August opened and we got back-to-back 1%+ days. Those two days taken in solidarity could be viewed as a sign of concern (as most news headlines would lead you to believe). However, when viewed in conjunction with the lack of movement over the prior 30 days, they don’t seem so bad. Fast forward 10-days and we are back at lows for the VIX.

The recent action is interesting when viewed alongside historical average VIX readings at this point in the year. The graph below shows three lines:

• Red Line: year-to-date movement for the VIX
• Blue Line: average VIX level based on annual trading days
• Yellow Line: average VIX level based on annual trading days only in the first year of a president’s term

As you can see in the graph, the yellow lines and blue lines track one another well. If you look closely, you can generally see the first few months of a president’s term show slightly higher than average volatility (yellow line above blue). That switches after the 100 days mark to lower-than-average volatility (blue line above yellow). You can also see that both lines move lower in unison, heading from day 50 into the summer, then pick up from about day 150 into day 200. While the changes are small, the directional theme makes sense.

This year seemed unique at the beginning but has settled back toward the historical averages. We opened the year around the 15 level, spiked to the upper 20s, fell back to the upper-teens, then jumped up above 50 in April (based on EOD values only). From there, we came right back down to the historical averages by around day 80.

The current value is slightly lower than the historical average at this point in the year. We are also getting close to the time of year when the average VIX level begins to creep back up above 20. As the old adage goes, history rarely repeats itself, but it often rhymes. This could be a good opportunity to do some back-to-school cleaning of the portfolio, or potentially look toward cheap hedging options like we discussed on Tuesday.

We’re now just about two weeks away from the beginning of September, which has earned an unsavory reputation with investors over the years. Historically, September has been the single worst-performing month for the S&P 500 Index (SPX), the Dow Jones Industrial Average (DJIA), and the Nasdaq Composite (NASD) (Source: Stock Trader's Almanac). The Almanac says, “September is when leaves and stocks tend to fall; on Wall Street, it’s the worst month of all.” Since 1958, September is the only month in which the S&P 500 shows a negative median return and the last few years have done little to improve its reputation as the S&P 500 (SPX) was down -3.92%, -4.76%, -9.34%, and -4.9% in September 2020 – 2023, although the index did buck the trend last year, gaining a little over 2%.

As a result of the poor performance of equities, many investors look for opportunities in other assets in September. One asset that has received a lot of credit for helping investors through this frustrating month is gold, and the numbers below support this statement. Gold has posted a positive return in 22 out of the 38 Septembers since 1987. In other words, September has been a positive month for gold investments about 58% of the time. The average return for gold during all 38 Septembers comes out to 1.23%, with an average of 4.97% during positive Septembers. From 2020 – 2023, gold finished September in the red but generally performed favorably compared to equities, especially in 2022 when gold outperformed the S&P 500 by more than 7%. Last year, while the S&P was up more than 2%, gold advanced 4.6%.

In the table below, you will also see the historical September returns for different asset classes as far back as data exists in our system. Not surprisingly, assets like gold, oil, and bonds have provided the best returns.

However, up versus down is just half the story -- the magnitude of returns is another thing to consider. Take a look at the two international equity proxies in the table (the developed and emerging stock ETFs). Even though they have historically posted a gain more than 50% of the time, the losing years outweigh the winning years in terms of the magnitude of movement. For example, developed international stocks have seen gains in 53% of the Septembers going back to 1980, producing an average return of 3.5% in those years. However, during the 47% of the years when this index was down during September, the average loss was -5.27%. As a result, the average return for the month of September is in the red at -0.59%. Similar numbers can be seen for emerging markets and US small-cap equities.

Although September is generally viewed unfavorably by equity investors, there have been a few impressive outlying Septembers, such as 2007, 2009, and 2010, all of which saw gains of more than 3% for the S&P. Even though September has not generally been kind to the broad equity indexes, there have been opportunities provided by sector rotation. Take 2008 for instance. The S&P as a whole was down -9.20%, however, the DWA Bank Sector Index (DWABANK) actually provided a gain in excess of 5%. On the other side of the story, the Steel & Iron sector (DWASTEE) fell 31.8%, bringing the performance differential for September 2008 to 37.2%, the second-largest dispersion of all Septembers since 1999. In 2023, while SPX was down nearly 5% in September, the DWA Oil Index (DWAOIL) was up more than 2.5%.  

On average, the difference between the best and worst-performing groups is around 20% over the last 25 years. Last year, non ferrous metals (DWAMETA) outperformed oil by 7.2%, which was the smallest differential over the lookback period. Meanwhile, the largest spread came in 1999 (40.5%).

In the table below, you can see the best and worst-performing sectors during September for each year going back to 1999. Precious metals (DWAPREC) have been the most frequent bottom performer, turning in the worst performance six times since 1999 (2006, 2013, 2014, 2017, 2019, and 2021), however, the precious metals index has also been the best-performing group in six out of the 24 years, more than any other group. Semiconductors (DAWSEMI) has been another frequent bottom performer, finishing last in five Septembers.

Data released Thursday morning showed that the Producer Price Index (PPI) rose 0.9% in July, with core PPI rising by the same amount. The July reading is a significant pickup in inflation from the prior month, when both PPI and core PPI were flat, and significantly higher than consensus estimates of around 20 basis points. Prior to the PPI release, the fed futures market had been pricing in a better than 50% chance of three 25 basis point rate cuts by the end of the year; by the end of the day on Thursday, the odds of a third rate cut stood at 43%.

While the Fed is generally concerned more with consumer inflation, a pickup in producer inflation can signal a coming increase in consumer inflation. Policymakers are already on the lookout for tariff-driven inflation, so the jump in producer costs last month may be more concerning than it otherwise would be. Only time will tell whether the uptick in PPI ultimately leads to a rise in consumer inflation or if firms are forced to eat the additional costs without passing them along to consumers. But expectations for looser monetary policy may be toned down in the meantime.

At this point, the market seems to be digesting the data well, while the odds of a rate cut declined, fed futures are still pricing in a better than 90% chance of a 25 bps cut in September. Meanwhile, stocks finished the day flat with the S&P 500 (SPX) up 0.03% while the Nasdaq Composite (NASD) was down 0.01%.

Daily Option Ideas for August 14, 2025