September looms as a risk month for stocks, Yardeni says

Yardeni Research warns of potential S&P 500 volatility in September, a historically difficult month, suggesting the index may have already peaked in August at 6,501.86, noting Nvidia's strong results failed to lift the broader market. Key risks include the Federal Reserve's policy outlook, as Yardeni sees little need for rate cuts given robust economic data and firming inflation, alongside political pressures on the Fed, tariff challenges, and international headwinds from Europe and Japan. Despite these near-term concerns, recent selling is viewed as profit-taking rather than a bear market, potentially creating year-end buying opportunities, with gold forecast to climb towards $4,000 as investors seek safety.

Analysis

Yardeni Research highlights a near-term cautious outlook for U.S. equities, noting September's historical weakness and suggesting the S&P 500 may have already posted a temporary peak at 6,501.86 in August. This view is supported by the market's failure to sustain a rally following strong earnings from Nvidia (NVDA), indicating potential momentum exhaustion. The primary risk identified is a significant divergence between market expectations for a Federal Reserve rate cut in September and the firm's assessment that robust economic data—including strong consumer spending, rising wages, and firming services inflation—provide little justification for monetary easing. This policy uncertainty is compounded by political pressure on the Fed's independence and legal challenges to U.S. tariffs. Furthermore, international headwinds, including political instability in France, recessionary risks in Germany's manufacturing sector, and rising Japanese bond yields, contribute to a complex risk environment. In this context, Yardeni projects gold could climb toward $4,000 per ounce by year-end as a safe-haven asset, while also noting that any near-term pullbacks could present tactical buying opportunities for a traditional year-end rally if market sentiment stabilizes.

Key Decisions for Investors

• Monitor upcoming inflation and employment data carefully, as a hawkish Federal Reserve stance in September, counter to market pricing, could trigger a significant equity market repricing.
• Investors should be cautious about the technology sector's leadership, as the market's muted reaction to strong NVDA earnings may signal weakening breadth and near-term exhaustion in the AI-driven rally.
• Consider increasing portfolio hedges or allocations to safe-haven assets like gold, which is forecast to have significant upside potential amid rising macroeconomic and geopolitical uncertainty.
• Despite the risks, treat a potential September market pullback as a potential tactical buying opportunity, consistent with historical patterns that often precede a year-end rally.