HPWG September Market Update: Third Quarter Recovery Challenged by Rekindled Volatility

Jenna: Todd, we’re nine months into the year, and it has certainly been eventful. The markets rallied strongly off the April lows, but now, following the earnings season, we’ve seen volatility return. Some people are asking, “should we be worried that we could retest those lows?”

Todd: Not in my view, Jenna. It’s never fun to see markets pull back after a rally, but I see this as a reset, not a breakdown. Stocks had run a little hot, and with the earnings season winding down, there just hasn’t been enough fresh good news to keep momentum going. In other words, this volatility is healthy — it’s the market catching its breath.

Jenna: Can you explain the drivers now causing volatility?

Todd: There are a few concrete reasons why markets have been choppy:

First, Tariffs and Trade Uncertainty – A U.S. appeals court ruled that many Trump-era tariffs imposed under the International Emergency Economic Powers Act were not authorized. According to Reuters, those tariffs technically remain in place until at least October 14–15, while the administration appeals to the Supreme Court. And even if struck down, MarketWatch points out that tariffs on steel, aluminum, and autos fall under separate legal provisions and may stay intact. The bottom line? Investors dislike uncertainty, and right now, trade policy is back in the spotlight.

Secondly, recent Tech Weakness – Tech has been at the heart of both the rally and the pullback. AP News noted Dell shares fell on weaker-than-expected PC demand. Broadcom also slipped as analysts questioned how sustainable its AI chip backlog really is. Even Nvidia, which posted record quarterly sales north of $30 billion, offered guidance below Wall Street’s sky-high expectations (FactSet). When leadership stocks stumble, it shakes broader confidence.

Third, there is also Global Volatility – This isn’t just a U.S. issue. Market Pulse reported that in Asia, chipmakers weakness dragged Japan’s Nikkei lower by roughly 2.5%. In Europe, The Guardian highlighted that U.K. 30-year gilt yields spiked to a 27-year high on budget and political instability, and the British pound hit its weakest level since April. And in India, according to the Economic Times, the Sensex, an index which reflects the Bombay Stock Exchange that comprises of 30 stocks on the Bombay Stock Exchange dropped nearly 750 points, driven by profit-taking ahead of contract expirations.

So, when you put all that together, it’s a global wave of uncertainty that has investors moving to the sidelines.

Jenna: Todd, you said last week that markets are pricing in a Fed rate cut in September. In fact, FactSet data shows the probability of a quarter-point cut is now over 75%. Normally, that’s good for stocks. So why are markets still sliding?

Todd: Great point, Jenna. Normally, rate cuts give stocks a tailwind. But what matters is why the Fed is cutting. Right now, investors see cuts as a response to slowing growth and rising risks — not a celebration of strength.

At the same time, MarketWatch reported that U.S., U.K., and French fiscal deficits have pushed bond yields higher — the 10-year Treasury yield is back around 4.3%. Clearly, Sticky inflation also hasn’t gone away. So, while rate cuts are supportive, they’re being interpreted as a defensive move, not an offensive one. This is why markets are still cautious.

Jenna: Something else I don’t quite understand — when tariffs were first imposed, the market sold off. Now that a court has ruled many of them unauthorized, the market is selling off again. Why both times?

Todd: Because markets hate uncertainty more than anything. When tariffs were imposed, the concern was higher costs and slower trade. Now that they’ve been struck down, the worry is about what comes next — will revenues fall? Will new tariffs be imposed under different laws? Reuters notes the tariffs remain for now, but the uncertainty keeps investors on edge. That’s why both events sparked selling.

Jenna: What do you see ahead that could bring buyers back into the market, or send them away in the near term?

Todd: Looking ahead, the key focuses this week is jobs data. According to Investopedia, Friday’s non-farm payrolls report is expected to show only about 75,000 jobs added, down from 114,000 the prior month, with unemployment ticking up to 4.3%. Wages will also be closely watched, because if wage growth cools, that could reinforce the case for a rate cut.And don’t forget earnings. MarketWatch notes Salesforce reports on September 3rd, followed by Broadcom on September 4th. These two are bellwethers: Salesforce gives us insight into enterprise software demand, while Broadcom is key for semiconductors and AI infrastructure. Their results will matter not just for those stocks, but for sentiment across tech.

Jenna: Do you have any additional comments about the recent volatility?

Todd: I have a few key takeaways on why investors should not be getting too pessimistic now.

Consolidations and Corrections after a big stock market run up are completely normal, even in strong bull markets, and they often are necessary to reset valuations and help create new opportunities.”? 

The Fed still has flexibility. The fact that cuts are even being considered shows they have room to support growth. 

Corporate profits remain strong in many sectors, particularly the areas where we have concentration and cash flows continue to underpin long-term value. 

Innovation in drivers like AI, reshoring of manufacturing, infrastructure spending, and healthcare advancements remain intact. 

And global diversification means weakness in one region often leads to potential opportunities in another. 

So, in my view, this isn’t the end of the cycle. It’s an adjustment.

Jenna: I heard a presenter on CNBC saying September was a bad month for markets. Is this true?

Historically, according to MarketWatch, September has been the weakest month for stocks. Since 1950, the S&P 500 has averaged a loss of about half a percent in September. That’s usually because investors rebalance after the summer, tax planning begins, and the Fed often meets in September.

But that’s just a seasonal tendency, not a guarantee. In fact, Some Septembers have been very strong. The important thing is to focus on fundamentals — earnings, Fed policy, and long-term growth themes — and those remain constructive.

Jenna: So the bottom line is this volatility is uncomfortable, but it’s not a crisis. It’s a reset, and history shows markets move past these periods. The long-term story — innovation, earnings, and Fed flexibility — still supports a bullish outlook

Todd: Exactly, Jenna. Stay focused on the big picture, not the noise.” In addition to this, if clients are able, I strongly recommend they add to their portfolios and buy dips like these. History has shown this is how real wealth is created over time, and I still believe we will be much higher by the end of the year. Thank you for listening to our September Market Update. We look forward to hearing from you if you have any questions, send us an email, or give us a call.

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