Wall Street is said to brace for crucial September tests
Aug. 31, 2025 10:05 AM ET
The next two weeks could determine whether the U.S. stock rally keeps rolling or runs into turbulence, Bloomberg News reported Sunday. A series of market-moving events such as jobs data, an inflation report and the Federal Reserve’s policy meeting arrives within 14 trading sessions, just as the S&P 500 ( SP500) heads into September, historically its weakest month.
Despite a 30% surge from its April lows, volatility has been nearly absent. The VIX ( VIX) has stayed below its one-year average, and the S&P 500 ( SP500) hasn’t posted a 2% drop in more than 90 sessions, the longest stretch since mid-2024.
Analysts are warning that the calm may not last. Investors are right to be cautious in September, Thomas Lee of Fundstrat said to Bloomberg News, noting that the Fed’s expected shift toward rate cuts complicates positioning. He predicts the index could slip 5% to 10% before rebounding to as high as 7,000 by year-end.
Traders are underpricing risks, according to Citi strategist Stuart Kaiser, with hedge funds betting heavily against volatility much like they did before past market shocks. A similar setup last year preceded the yen carry trade’s collapse.
The Fed is widely expected to cut rates on Sept. 17, but some strategists, including Ed Yardeni, argue sticky inflation could delay easing. If CPI in hot and jobs growth is strong, traders may realize cuts aren’t guaranteed, he said, though he expects stocks to recover on the back of a still-solid economy, Bloomberg News reported.
Underlying optimism remains. Strong corporate profits and resilient growth have kept investors heavily invested, with cash levels near historic lows, according to Bank of America ( BAC). Yet even bullish investors like Tatyana Bunich caution that valuations are stretched. Big tech is still a buy, but “we’re holding some cash on the sidelines and waiting for any decent pullback,” she told Bloomberg News.
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