tl;dr
Market rally faces potential downturn as September approaches, with analysts warning of historical volatility. Paul Ciana of BofA highlights risks as S&P 500 nears key targets, noting September's average 1.1% decline since 1928 and 2025 presidential cycle challenges. JPMorgan's Andrew Tyler warns of...
**Market Rally Under Pressure: Analysts Warn of Potential Downturn as September Approaches**
Investors are on high alert as Wall Street grapples with conflicting signals. Paul Ciana, Bank of America’s global chief technical strategist, has raised the alarm that the stock market’s recent rally—driven by optimism around interest rate cuts and economic resilience—may be heading for a correction. His warning comes as the S&P 500 inches closer to a key psychological milestone, but signs of fatigue in key indicators suggest the party could be ending soon.
The S&P 500 has surged to new heights, hitting Bank of America’s 6,500 target this summer and flirting with its 6,625 secondary target at 6,606. Yet Ciana points to historical patterns that could derail the momentum. “The summer-to-fall transition is notoriously tough for stocks,” he says. Data from BofA shows the S&P 500 has posted an average return of -1.1% during the last 10 days of September since 1928, with only 40% of instances ending in gains. The month’s volatility is compounded by the 2025 presidential cycle, which Ciana notes has historically been even worse: the index rose just 29% of the time in September’s final days, with an average drop of 1.5%.
Adding to the tension is the Federal Reserve’s upcoming rate decision. JPMorgan’s Andrew Tyler highlights that the market is pricing in a 96.1% chance of a 25-basis-point rate cut at the September meeting. While a dovish move could initially boost stocks—potentially pushing the S&P 500 to 6,650—Tyler warns of a “sell-the-news” effect. “Investors may take a step back to reassess the macro environment, the Fed’s future actions, and other headwinds,” he says. These include waning retail participation, weaker corporate buybacks, and the chaos of quarter-end rebalancing. Tyler estimates a 5% pullback could follow if these factors align.
Even as the Dow Jones Industrial Average hit a record high, Ciana spots warning signs in the Dow Jones Transportation Average. The index, which often foreshadows broader market trends, has failed to break above key resistance levels and recently dipped below its trend line support. Its 200-day moving average is also declining, suggesting a loss of momentum. Meanwhile, market breadth is faltering: the NYSE advance-decline line has stalled, indicating fewer stocks are participating in the rally.
For investors, the crossroads is clear. On one hand, rate cuts and a resilient economy could fuel another leg up. On the other, historical patterns and technical indicators hint at a potential reset. As Ciana puts it, “The market is at a fork in the road.” Whether it turns bullish or bearish may depend on how investors navigate the stormy waters of September—and whether the Fed’s next move is enough to calm the nerves.
For now, the question isn’t just about where the market is headed, but how prepared investors are to weather the turbulence. As one analyst put it, “The rally might be a sprint, not a marathon.”