September has a reputation on Wall Street for being volatile and this year is looking to validate that thesis with a few weak economic datapoints. While last week’s data is certainly concerning, it’s important to recognize that is does not constitute a trend at this point and the underlying backdrop (solid GDP growth, historically low unemployment, moderating inflation and a Federal Reserve Board signaling lower rates to come) is still favorable.

Solid economic data has taken back the recent growth scare we saw in August and the markets have rallied back towards their recent highs. AI and technology sector leadership has given way to the more economically sensitive cyclical/value sectors and there has been broad participation in the recent stock market advance. With Q2 earnings now largely behind us, investors will begin to shift their fucus on 2025 earnings and multiple thereof. This could allow for multiple expansion, especially considering the overall positive economic backdrop with solid 3% GDP growth, historically low unemployment, and inflation trending downward.

arly in the week, U.S. equities rose modestly on limited financial news, with underwhelming reports on E-Commerce Sales and the Leading Indicators Index bolstering the case for a September rate cut. Despite this positive start, the S&P 500’s eight-day winning streak ended Tuesday as Yen Carry Trade concerns reignited. Later in the week, a significant downward revision to Bureau of Labor Statistics jobs data (the largest revision in 15 years), further supported expectations for a 50-basis point rate cut next month and the markets began to rally. The buying continued into the end of the week aided by numerous favorable comments from our Fed chair at the Jackson Hole Symposium.

This bounce retraced much of the recent decline which was fueled by concerns over slowing economic growth, the Bank of Japan’s interest rate policy, and AI-related sector unwinding. While these factors have temporarily eased, it’s important to note that underlying economic challenges persist.

There are still many positives at play, including economic growth, strong corporate profits, historically low unemployment, and declining inflation.