Looking ahead to the first week of September, Wall Street is gearing up for a tense period as September has always been rough for stocks.
But this year has the potential to be different as there’s a lot more at play than usual, and that creates both headaches and opportunities depending on how you look at it.
Here’s what the investors are watching: The Fed is still calling the shots on where this market goes, and every word from Powell gets dissected like it’s the Constitution.
Inflation numbers keep coming in, and they are basically predictions about what the Fed does next.
5 factors that could shape the week ahead
1. Everyone’s expecting the Fed to cut rates by a quarter point in September, and most investors think that’s already baked into stock prices.
The real question is what happens if they say something unexpected or change their tune about what’s coming next.
The Fed has been pretty careful lately, especially with all the talk about the economy slowing down. So any shift in their messaging could really shake things up.
History tells us that rate cuts usually give stocks a boost, but if the economic data that comes out afterward doesn’t show things are actually getting better, that rally could fall apart pretty quickly.
2. Inflation is still the big story after July’s numbers showed prices up 2.7% from last year.
When the new CPI and PPI data come out in early September, everyone will be looking to see if things are actually cooling down or if we’re stuck with these higher prices.
This matters for more than just the headline numbers. If inflation stays sticky, it makes the Fed’s job harder and keeps borrowing costs elevated.
That ripples through to everything else like how much people are willing to spend and how companies are performing.
3. The new tariffs that kicked in this quarter are still creating headaches for everyone trying to figure out what comes next.
The US-China trade deal deadline keeps getting pushed back, which just adds more uncertainty to an already messy situation. Nobody really knows where this is heading, and that makes it tough to plan ahead.
Companies are feeling it in different ways. Manufacturing is getting hit, supply chains are scrambled, and multinationals are trying to figure out how this affects their bottom line.
4. The job market is starting to worry people. The latest forecasts show hiring is expected to slow down, and unemployment might tick up over the next couple of quarters.
When fewer people have jobs or feel secure about their work, they spend less money. And when consumers pull back, it hits company profits pretty directly.
Analysts are already expecting earnings growth for the S&P 500 to drop to around 7.2% this year, which is a noticeable slowdown.
5. September’s historical weakness usually brings rotation into defensive sectors, such as utilities, energy, healthcare, and consumer staples, which traditionally outperform during down markets.
This week, investors are expected to overweight these areas and trim exposure in technology and consumer discretionary stocks, which often lag during choppy conditions.
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