First Week of September: What Happened in the Markets

First Week of September: What Happened in the Markets

Equities on a sustained rebound
The week saw an equity rally fueled by growing expectations of Fed rate cuts. The S&P 500 posted new records, the Nasdaq rose 1%, while the Dow Jones gained about 350 points.

Bonds and gold in the spotlight
Long-term Treasury yields declined, in line with a softer monetary policy outlook. Gold reached record levels above $3,500/oz, reflecting strong demand as a safe-haven asset.

Emerging markets and Asia
Asian markets benefited from optimism tied to expected rate cuts: all regional exchanges closed higher, despite falling oil prices ahead of OPEC+ decisions.

Labor market: US data in line with the cooling trend

• The August nonfarm payrolls report showed modest growth of 75,000 jobs, in line with expectations but well below the annual average.
• The unemployment rate rose to 4.3%, the highest since 2021.
• Other indicators, such as job openings (JOLTS) and ADP data (only 54,000 new private-sector jobs), confirm weakening labor demand.

Implications for the Fed and the rate path

High probability of a rate cut in September
All major indicators — markets, FedWatch, analysts — are betting on a 25-basis-point cut at the September 16–17 meeting, with probabilities estimated between 90% and 100%.

Fed members’ positions

• Governor Waller expressed support for starting a series of cuts, calling them justified by the weakening labor market, though not advocating for a significant 50 bp move at this stage.
• San Francisco Fed President Williams stated that a September cut now seems likely, barring surprises in labor data.

Where to focus in the coming weeks

Equities

• Favor sectors sensitive to rate cuts: tech, small caps (the Russell 2000 gained over 7% in August).
• Maintain an increasing share in defensive sectors such as healthcare and utilities, which tend to outperform in volatility and macro slowdowns.

Bonds

• Medium-to-long duration bonds benefit from falling yields; 5–10 year Treasuries offer a tactical opportunity.
• Consider inflation-linked or investment-grade bonds for protection against potential inflation shocks from tariffs.

Commodities

• Gold remains a key safe haven, supported by lower real yields and political uncertainty.
• Silver and other transition-related commodities may benefit from a weaker dollar.

Liquidity and tactical positioning

• Keep 5–10% in cash for potential entries during dips and sudden corrections.
• Closely monitor developments in inflation (PCE, CPI) ahead of the Fed meeting and possible guidance revisions.

In summary

The first week of September confirmed the dominant trend: markets are pricing in a more accommodative Fed, with equities rising, bonds rallying, and gold climbing. The labor market is slowing, reinforcing expectations for a rate cut.

Suggested strategy: combine tactical exposure to assets sensitive to monetary easing with defensive protections — while keeping a liquidity buffer for rapid redeployment.