Editor
The U.S. stock market is gearing up for a pivotal month, with futures showing a slight bounce back after a tech-driven selloff. This brief moment of relief comes as investors navigate a tricky environment filled with looming economic reports and ongoing geopolitical uncertainties.
After a lengthy stretch of record highs, the market is now entering a critical phase. In the next three weeks, a series of key events—from the latest jobs report and inflation figures to a much-anticipated decision from the Federal Reserve on interest rates—will play a crucial role in deciding whether the bull market has more momentum or if it’s about to slow down. All of this is happening as traders prepare for what is typically the weakest month of the year for U.S. stocks.
A Busy Calendar and the Fed’s Next Move
As we step into a new month, the calendar is buzzing with activity. Wall Street is on the edge of its seat, waiting for crucial economic indicators that could either propel the market higher or cause a dip. Over in Europe, stocks are showing a bit of life, with the Stoxx 600 index inching up by 0.2%. Defense stocks are particularly on the rise, following a report from the Financial Times that Europe is crafting plans for possible post-conflict deployments in Ukraine.
On the flip side, the commodity markets are telling a different tale. Silver has surged past $40 an ounce for the first time in over ten years, while gold is inching closer to setting a new all-time record. The optimistic outlook for these precious metals seems to stem from growing confidence that the Federal Reserve will lower interest rates this month.
“The threshold to prevent a Fed rate cut on September 17 seems quite high,” noted Deutsche Bank AG economist Peter Sidorov. However, he also sounded a note of caution, pointing out that with Fed funds futures now anticipating over 140 basis points of easing by the end of 2026, “markets are expecting a level of easing that has only been seen during recessions since the 1980s.”
European Turmoil and Political Risk
Political uncertainty is looming across the Atlantic, casting a shadow over the markets. European bonds have taken a hit ahead of a crucial confidence vote that could potentially bring down France’s government. The gap between French and German 10-year yields, a key measure of risk, has remained steady at 79 basis points, although it’s still hovering near its highest point since January.
Alexandre Baradez, the chief market analyst at IG in Paris, isn’t shocked by this development. “I wouldn’t be surprised to see the spread between Germany and France test 100 basis points,” he remarked. He thinks this could trigger more profit-taking in European banking stocks, especially since the European Central Bank seems to be hitting the brakes on any rate cuts for now.
But the political upheaval isn’t just a European issue. Over in Asia, Indonesian stocks experienced their largest drop in almost five months. This decline came on the heels of violent protests over rising living costs and inequality, which led President Prabowo Subianto to cancel a planned trip to China.
What Strategists Say: A Bullish Outlook Amid Headwinds
Despite the challenges ahead, some strategists are feeling quite optimistic. Evercore ISI’s team, led by Julian Emanuel, thinks that investors shouldn’t let a temporary market dip shake their confidence. They’re forecasting a solid 20% increase in the S&P 500 by the end of 2026, seeing the current short-term fluctuations as a chance to “boost their investments.”
This upbeat sentiment is shared by others in the field. For example, Goldman Sachs Group Inc. anticipates that the Stoxx 600 will rise about 2% by the end of the year, pointing to better growth prospects and appealing valuations. Meanwhile, JPMorgan Chase & Co. strategist Mislav Matejka referred to the recent slowdown as a “healthy” sign—a necessary pause for a market that has surged ahead so quickly.
As we approach a wave of new information, the upcoming weeks will be crucial. Will the stock market continue to defy historical patterns and keep its impressive upward trend, or will it finally give in to the pressures of a shaky global economy? For now, investors are on edge, eagerly awaiting the first major indicators to emerge.
Corporate News:
- Revolut Ltd. has launched a share sale for some employees, valuing the fintech company at $75 billion.
- McLaren Racing Ltd., owner of the championship-leading Formula One team, is reportedly valued at over £3 billion in a new stake sale.
- The billionaire Cheng family, controlling shareholder of New World Development Co., is considering injecting capital into the debt-laden builder.
- Banca Monte dei Paschi di Siena SpA called a board meeting to consider raising its bid for rival Mediobanca SpA.
