Traders' Top Two Ideas for September as S&P 500 Closes Winning Month

Source: NYSE

The S&P 500 closed out another winning month.

The benchmark index rose nearly 3% in August, its seventh straight month of gains and its best winning streak since early 2018.

To kick off September, CNBC's "Trading Nation" asked its traders on Monday for their best seasonal trades.

Investors should stick with August leadership, according to Michael Bapis, managing director of Vios Advisors at Rockefeller Capital.

"The financial sector is probably the most undervalued and under the radar for a few different reasons that we'll highlight, one being the economic recovery. They're going to be one of the biggest, if not the biggest, beneficiaries of the recovery," Bapis said.

Financials took leadership of the S&P 500 in August, rising by 5%. Banking stocks tend to do well during periods of economic strength, given the boost to transaction and lending activity.  

"Most importantly, from a valuation standpoint, many of them have super high and attractive valuations, trading at low double-digit [price-earnings ratios with] high dividend yields," Bapis added.

Bill Baruch, president of Blue Line Capital, is looking to hedge the market after its steep runup.

"While everybody's looking to buy, I'm going to take a different approach here," Baruch said during the same interview. "Let's take a look at how you protect your downside from this big, big bullish trend."

Anticipating the potential for a 5% pullback in September, Baruch is buying the 4,400/4,300 put spread for the SPX with Oct. 31 expiration. He targets a possible move down to 4,335 for the S&P 500 — it closed Tuesday at 4,522.

"Remember, last year September, a 10% sell-off, it didn't bounce back as quick as we've seen every month this year, so that's my angle," said Baruch.

September is historically the weakest month for the S&P 500. Since 1944, the index has fallen an average 0.56% during the month, according to CFRA data.


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