September Storms or September Surprise? Markets Face a Crossroads

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Opening Note

September has a reputation for being Wall Street’s least favorite month. On average, it delivers the weakest returns of the year. Yet 2025 has been anything but typical. This week alone, markets are contending with slowing job growth, a Federal Reserve that’s tiptoeing toward a pivot, tariff rulings shaking Washington, and safe-haven assets racing to new highs. Meanwhile, technology and AI earnings continue to dominate headlines.

For investors in the “High Earners, Not Rich Yet” category, the story isn’t about chasing headlines or reacting to every dip. It’s about understanding how these forces interact—policy, geopolitics, seasonality, and innovation—and positioning intelligently for the months ahead. Let’s unpack the five themes shaping markets this week.

1. Fed’s Dilemma: Between Jobs and Liquidity

The labor market is cooling, and that matters. Over the past three months, the U.S. has added an average of just 35,000 jobs per month—the weakest streak since the years following the Great Recession. At the same time, unemployment is holding steady around 4.2% and wages are still rising at roughly 4% year-over-year.

This creates a split picture: households aren’t collapsing, but the pace of hiring is clearly slowing. The Fed is watching closely. With its September meeting around the corner, many analysts expect a 0.25% rate cut. That’s less about “rescuing” the economy and more about easing financial conditions before labor market cracks widen.

But there’s another piece at play: liquidity. Since 2022, the Fed has been letting its balance sheet shrink—rolling off Treasury and mortgage securities. Now, reserve levels are approaching thresholds that could stress the financial system. Translation: the Fed may have to stop draining liquidity sooner than planned, even as it debates cutting rates.

For investors, the key takeaway is that policy is shifting from being a headwind to a potential tailwind. Rate cuts and stable liquidity don’t guarantee smooth sailing, but they do soften the odds of a sharper downturn.

2. Seasonal Setback or September Surprise?

If you’ve heard “Sell in September,” you’re not alone. Historically, the S&P 500 has lost about 1.1% on average during this month. The logic is simple: traders return from summer holidays, reassess risks, and often take profits.

But 2025 is already rewriting the playbook. The S&P 500 remains above its 200-day moving average, a technical marker associated with stronger seasonal outcomes. On top of that, corporate earnings have been resilient, AI-related investment continues to pour in, and analysts at major banks are forecasting gains into mid-2026.

Does that mean September is risk-free? Hardly. Markets are overbought after a strong summer, and any surprise in jobs or inflation data could spark volatility. Still, this year’s setup suggests a more balanced narrative: history whispers caution, but momentum argues for patience.

3. Bond Rout & Gold’s Surge: Hawks, Tariffs, and Safe Havens

The first week of September opened with a jolt. A U.S. court ruling limited the president’s ability to extend certain tariffs, while also restricting the dismissal of sitting Federal Reserve governors. Markets dislike uncertainty—and this ruling introduced plenty of it.

The reaction was swift. Bond markets sold off heavily, pushing yields in the U.S. and Europe to multi-year highs. Higher yields typically signal tighter conditions for borrowing, and they rattled equity markets early in the week.

Meanwhile, investors poured into traditional safe havens. Gold surged to record levels near $3,500 per ounce, while silver pushed past $40. These moves highlight how quickly capital can shift when political and monetary stability is questioned.

For investors, the lesson is not to pile into commodities as a short-term trade, but to recognize how safe-haven flows can reshape the investment landscape. Rising gold prices, for example, often coincide with lower confidence in fiat currencies and greater caution in equity allocations.

4. Dollar Weakness and Currency Volatility

The dollar has softened, hitting a five-week low as traders brace for the latest employment numbers. A weaker dollar has ripple effects: it boosts U.S. exporters, makes imports more expensive, and often lifts commodity prices.

For globally diversified investors, this matters in two ways:

Equity exposure abroad may benefit if the dollar continues to decline, as foreign profits translate into more dollars.

Inflation pressures could re-emerge if import costs climb, complicating the Fed’s job.

The dollar’s decline isn’t necessarily the start of a long bear market in currencies, but it is a reminder that FX moves can amplify—or cushion—portfolio returns.

5. Tech & AI Earnings Take Center Stage

Even amid macro noise, corporate earnings continue to move markets. This week, Broadcom and Salesforce are in the spotlight, both positioned as bellwethers for AI adoption across industries. Nvidia’s blockbuster quarter set the tone last month, and investors now want to see if peers can sustain the momentum.

AI isn’t just a “tech story”—it’s a productivity story. Companies are investing to cut costs, scale faster, and stay competitive. For investors, strong AI-linked earnings reinforce the idea that technology remains a structural driver of market returns.

At the same time, not all names will be winners. As the sector matures, dispersion will increase: some firms will lead the charge, while others will struggle to capture real value. This makes diversification and systematic allocation more important than ever.

Closing Thoughts

This September is shaping up to be a test of balance. The Fed is walking a tightrope between supporting growth and preserving stability. Seasonal trends are colliding with strong momentum. Political rulings are reshaping market psychology. And technology continues to redraw the lines of competitive advantage.

For investors, the path forward isn’t about calling every short-term move—it’s about staying informed, diversifying across durable themes, and letting systematic approaches do the heavy lifting.

At Surmount, we believe that investing should be both data-driven and accessible. As you head into the fall, remember that volatility is not the enemy; it’s the backdrop against which disciplined strategies can create lasting value.

See you next week.