Stocks tend to plummet in September - but expect a better month this year, Bank of America says

• The S&P 500 tends to perform badly in September, sliding 0.7% on average.
• But it could buck that trend this month, according to Bank of America.

Stocks are one trading session into what's historically been their worst overall month.

Since 1945, the S&P 500 has slid 0.7% on average in September, data from CFRA Research shows.

But the benchmark index's 18% rally year-to-date means that it's well-placed to buck that trend and rack up further gains this month, Bank of America technical strategist Stephen Suttmeier said Friday.

"The best setup for both September and the rest of the year is when the S&P 500 rallies between 10% and 20% from January to August," he wrote in a research note seen by Insider.

"This is the scenario for 2023," Suttmeier added.

Stocks have historically struggled in the ninth month of the year – leading to traders coining the term the "September Effect", even while there's little consensus on why the S&P 500 and Nasdaq Composite tend to fare so poorly.

But they needn't fret in 2023 – because the massive, AI-fueled rally that's lifted equities so far this year is a green light signaling further gains, according to Suttmeier.

Bank of America's chief technical strategist noted that when the S&P 500 is up between 10% and 20% prior to September, it racks up gains over the month 65% of the time with an average return of 0.8%.

The large-cap gauge is likely to climb 8% from its current level to finish the year trading at around 4,850 points if it follows historical patterns, he added.