U.S. stocks may be heading into choppy waters despite widespread confidence that the Federal Reserve will trim rates on September 17.
JPMorgan’s trading desk is telling clients that the long-awaited cut could actually trigger profit-taking instead of fueling another leg higher.
Markets have climbed steadily since spring, but Andrew Tyler, who heads the bank’s trading desk, said momentum is running into a cluster of obstacles – sticky inflation , weaker labor figures, trade frictions, and the seasonal drag of September.
Historically, this is a month when retail activity thins out and companies ease off share buybacks, reducing two major sources of demand for equities. Against that backdrop, even a supportive Fed may not be enough to extend the rally.
JPMorgan is still leaning bullish in the near term, but with far less conviction than earlier in the year. The desk is advising clients to protect positions through volatility trades and gold exposure, a nod to the possibility that equities could briefly stumble before regaining footing.
On the policy side, strategist Fabio Bassi expects only a modest quarter-point cut. He described it as an “insurance” move aimed at cushioning slowing payroll growth while inflation remains above target. In his view, the weaker jobs data makes holding steady untenable, but the Fed has little justification for a bolder half-point reduction.
The takeaway for investors: a rate cut outside recessionary conditions can still support stocks over the medium term, but with risks mounting and expectations already priced in, September’s decision may prompt investors to lock in gains rather than chase fresh highs.
