Wall Street is poised for a crucial period that will determine the fate of its recent sharemarket rally. Several key economic events are scheduled over the next two weeks, including jobs reports, a vital inflation reading, and the Federal Reserve’s upcoming interest rate decision. These events will likely set the tone for investors as they return from their northern summer vacations.
The sharemarket finds itself at a potential turning point. The S&P 500 Index recorded its smallest monthly gain since July of the previous year and is now entering September, which has historically been its weakest month. Market volatility has also decreased significantly, with the Cboe Volatility Index (VIX) exceeding the critical level of 20 only once since the end of June. The S&P 500 has not experienced a 2 per cent sell-off in 91 trading sessions, marking its longest such period since July 2024.
Despite these factors, the S&P 500 reached an all-time high of 6501.58 on August 28. The index is currently up 9.8 per cent year-to-date, having risen 30 per cent since its low on April 8. According to Thomas Lee, head of research at Fundstrat Global Advisors, investors are right to be cautious in September. He notes that the Federal Reserve is restarting a dovish cutting cycle after a prolonged pause, making it challenging for traders to navigate the market.
