Weekly Trends
The past week was marked by a convergence of expectations toward the September 16-17 FOMC meeting, with markets oscillating between technological optimism and macroeconomic caution. The VIX, which fell to 10-month lows (14.26 points at end-August), reveals dangerous complacency in the face of seasonal risks. Paradoxically, this period of apparent calm coincides with contradictory signals: the S&P 500 establishes new historical records (6,508 points) while respecting the historically unfavorable pattern of September. This dichotomy underlines the tension between solid fundamentals (earnings growth of 10.6% year-over-year) and growing geopolitical uncertainties, notably with the Sino-American trade war intensifying with tariffs now reaching 145%.
News
1. The Fed Prepares to Begin Its Rate-Cutting Cycle¹
Markets anticipate with 97.3% probability a first 25 basis point cut during the September 16-17 FOMC meeting, marking a historic turning point after a long period of elevated rates. This expectation is based on the weakening of the US labor market, with only 22,000 job creations in August, well below the expected 100,000.
Analysis — This cut will mark the first of 2025 and fits into a preventive strategy against economic slowdown risks. The timing remains risky with tariff uncertainty that could reignite inflation.
In Brief — A virtually certain rate cut that opens a new accommodative monetary cycle.
2. The S&P 500 Defies September Historical Statistics²
Despite the historically unfavorable pattern of September (100% probability of decline after a strong August with more than 5 records), the S&P 500 gained 0.8% and reached new peaks around 6,508 points. This performance contradicts Ryan Detrick’s analyses that warned of an inevitable correction.
Analysis — This resistance to historical patterns could indicate a structural evolution of markets, driven by artificial intelligence and expectations of accommodative monetary policy. Nevertheless, vigilance remains warranted.
In Brief — The US market resists seasonal trends thanks to technological fundamentals.
3. Gold Reaches Historical Peaks Above $3,500³
Gold ounce broke through the symbolic threshold of $3,500 to reach $3,635 on September 8, driven by dollar weakening and rate cut expectations. Goldman Sachs maintains its target of $3,700 by end-2025.
Analysis — This surge reflects the quest for safe havens amid geopolitical and monetary uncertainties. Gold also benefits from massive purchases by Asian central banks that structurally support demand.
In Brief — Gold confirms its status as the ultimate safe haven in an uncertain environment.
4. Nasdaq Establishes New Records Driven by Semiconductors⁴
The Nasdaq Composite gained 0.9% to reach new historical highs, pulled by Broadcom (+4%) and Nvidia in the wake of artificial intelligence prospects. The Magnificent Seven collectively advanced 1.3%.
Analysis — This performance illustrates the resilience of the technology sector against macroeconomic fears. AI continues to support valuations, but the concentration of gains on few stocks raises sustainability questions.
In Brief — US technology dominates gains despite macro uncertainties.
5. US Bond Yields Begin Their Descent⁵
The 10-year Treasury yield fell to 4.05% on September 9, its lowest level since May, anticipating Fed monetary easing. This 25 basis point decline over one month reflects expectations of accommodative policy.
Analysis — This long-term rate easing validates expectations of economic slowdown and provides technical support to equity markets. It also creates a favorable environment for rate-sensitive sectors.
In Brief — Bond yields anticipate the coming monetary easing.
6. EUR/USD Resists Despite Monetary Policy Divergences⁶
The euro maintained around $1.17 despite growing divergences between the Fed (toward easing) and the ECB (« wide open » policy according to Christine Lagarde). This resistance questions European fundamentals.
Analysis — EUR/USD stability masks underlying tensions. The 7.90% appreciation over six months could create difficulties for European exports, particularly in a trade war context.
In Brief — The euro resists but monetary divergences pose future risks.
7. Trade War Intensifies with Record Tariffs⁷
The United States imposed 145% tariffs on Chinese products, provoking Beijing’s retaliation at 125%. This escalation, the strongest since the conflict began, threatens 0.2% of global trade according to forecasts.
Analysis — This intensification of trade tensions represents a major systemic risk for the global economy. Companies without pricing power will be particularly vulnerable to this inflationary pressure.
In Brief — Tariff escalation reaches record levels and threatens economic stability.
8. US Inflation Data Shows Signs of Moderation⁸
August’s Producer Price Index (PPI) surprised to the downside at 2.6% year-over-year versus 3.3% expected, strengthening the case for Fed rate cuts. Core PPI also disappointed at 2.8% versus 3.5% anticipated.
Analysis — This unexpected moderation in producer inflation strengthens Fed confidence to proceed with rate cuts. It suggests that inflationary pressures are easing despite tariff tensions.
In Brief — Producer inflation surprises to the downside and validates accommodative expectations.
Strategic Perspectives & Scenarios
Scenario Interactions
Current scenarios revolve around three key interdependent variables: the evolution of US monetary policy, the intensity of the Sino-American trade war, and markets’ ability to maintain their elevated valuations against seasonal risks. The central scenario of a 25 basis point Fed rate cut creates a favorable environment for risk assets, but this positive dynamic could be quickly compromised by tariff escalation that would reignite inflation. The 97.3% probability priced in by markets for a September cut creates disappointment risk if the Fed temporizes due to geopolitical uncertainties. Moreover, the exceptionally low VIX level (14.26) suggests risk undervaluation, particularly dangerous in September, a historically volatile month. The interaction between these factors will determine whether markets can maintain their upward trajectory or suffer the technical correction expected for months. The temporal sequence will be crucial: benign inflation data this week would reinforce the Fed cut scenario, while unpredictable tariff escalation could quickly reverse expectations. This interdependence explains why probabilities assigned to different scenarios remain relatively balanced despite apparently clear market signals.
Scenario A: Soft Landing with Monetary Support
This scenario foresees an orderly Fed rate decline beginning with 25 basis points in September, followed by two to three additional cuts by end-2025. The US economy slows sufficiently to justify monetary easing without falling into recession, while inflation continues to converge toward the 2% target. Trade tensions stabilize temporarily through diplomatic negotiations, allowing companies to gradually adapt to new tariffs. In this framework, equity markets continue their progression, supported by rate easing and maintained earnings growth. The technology sector continues to benefit from massive AI investments, while rate-sensitive sectors (real estate, utilities) experience a rebound. Gold consolidates around $3,500-3,600, benefiting from dollar weakness but without excessive acceleration. European markets follow the US trend, supported by expectations of ECB easing in September.
- Estimated Probability: 65%
- Possible Strategies: Overweight risk assets (growth stocks, long bonds), underweight commodities except precious metals. Favor US technology sectors and European rate-sensitive stocks. Maintain defensive allocation in gold (5-10% of portfolio). Avoid sectors directly exposed to tariffs (imported consumer goods).
Scenario B: Technical Correction with Increased Volatility
Markets undergo the historical September correction with a 5-10% decline in the S&P 500, triggered by profit-taking on elevated valuations and approaching US political deadlines. The VIX rebounds toward 25-30, signaling volatility’s return after months of complacency. This correction remains technical and doesn’t question economic fundamentals, but it exposes the fragility of positions concentrated on the Magnificent Seven. The Fed still proceeds with its September cut to stabilize markets but adopts a cautious tone on future cuts. Trade tensions temporarily intensify, creating uncertainty about inflation prospects. In this context, gold accelerates its progression toward $3,700-3,800, fully benefiting from its safe haven status. Defensive sectors (healthcare, staples, utilities) significantly outperform, while technology consolidates after exceptional gains.
- Estimated Probability: 35%
- Possible Strategies: Increase defensive assets share (gold, short bonds, defensive sectors), reduce momentum stocks exposure. Favor volatility strategies and index puts. Strengthen positions in Asian and European safe havens less correlated to US markets. Maintain liquidity to capitalize on buying opportunities during correction.
Risk Warning
The information and analyses presented in this article are provided for informational purposes only and do not constitute investment advice in any way.
Going Further
To deepen your analysis of global financial markets, consult our weekly reports on central bank evolution and follow our advanced volatility indicators. Our StratFinanceAdvisory team also provides detailed sectoral analyses and macroeconomic scenarios updated daily.
Watch Glossary
- FOMC¹: US monetary policy decision-making body.
- VIX²: S&P 500 options implied volatility index.
- PPI³: Producer-level inflation measure.
- Magnificent Seven⁴: Apple, Microsoft, Alphabet, Amazon, Tesla, Meta, Nvidia.
- ECB⁵: Eurozone monetary institution.
- NIM⁶: Difference between bank interest revenues and costs.
- AI⁷: Machine learning and intelligent processing technologies.
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