The Momentum Train on Wall Street Continues to Roll Into September

Even with market dip, Wall Street’s risk-on momentum is rolling full speed into September, and few investors seem eager to hit the brakes.

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This week, markets held steady through a mix of political pressure on the Federal Reserve and Nvidia Corp.’s softer revenue outlook only wavering late Friday with a tech-driven pullback during thin trading. That end-of-week stumble barely dented an otherwise strong summer run, capped by the S&P 500 posting its fourth consecutive monthly gain.

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Investor appetite for risk is spilling across asset classes from corporate bonds and digital currencies to cyclical equities. The reasoning behind this optimism appears straightforward: the Fed looks ready to cut interest rates, U.S. consumers keep defying bearish expectations, and the AI narrative remains a powerful tailwind.

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That confidence has endured even as potential risks pile up. Trade disputes, a cooling job market, and mixed signals from the bond market haven’t derailed the rally. If anything, they’ve reinforced expectations that monetary easing is imminent and that the economic expansion, though mature, still has momentum.

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One way to gauge the market’s bullish tone is through a cross-asset momentum indicator from Societe Generale SA. This index tracks 11 components such as copper versus gold, cyclical stocks against defensives, crypto performance, and high-yield credit. Since April’s tariff-driven turbulence, the indicator has hit or approached its most optimistic levels at least five times, including a recent push this month.

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“Investors are realizing tariffs aren’t as damaging as initially feared, which is restoring confidence and that confidence is supported by strong fundamentals,” explained Omar Aguilar, CEO of Charles Schwab Investment Management Inc.

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Volatility or rather, its absence is another key theme. Short-term implied volatility across major assets has dipped below long-term averages, touching lows not consistently seen in about four years, according to Cboe Global Markets. This extended calm comes despite the shock from a recent jobs report. With U.S. GDP revised upward to 3.3% last quarter, investors have one more reason to stick with the bullish playbook.

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For Mandy Xu, Cboe’s head of derivatives market intelligence, this stability ties back to the economic backdrop.
“Despite tariff turmoil, consumers remain resilient, inflation is under control, and the Fed is preparing to cut,” said Xu. “Until that story changes, I expect volatility to stay muted in the near term.”

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Still, even the strongest rallies can edge into overconfidence a reality stumble hinted at. Yet for all the chatter, the S&P 500 ended the week down just 0.1%. Junk bonds booked a fourth straight week of gains, while 10-year Treasury yields climbed.

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“When every major asset class shows collapsing volatility, that’s a warning sign of complacency,” noted Peter van Dooijeweert, head of strategic investment partnerships at Capstone Investment Advisors. “The Fed faces intense political pressure, and the full economic impact of tariffs over the next year remains unclear. Markets seem overly calm given the uncertainties ahead.”

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But caution hasn’t stopped investors from leaning in. For many, this isn’t blind optimism it’s calculated acceptance of a market that has punished doubters all year. Labeling it complacency is easy; sitting on the sidelines is far tougher.

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Consider this: Barclays Research reports that institutional investors boosted equity purchases in August, led by hedge funds, commodity trading advisors, and risk-control strategies. This aggressive “re-risking” during a volatility slump has driven overall positioning to above-average levels.

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“The only real shock factor would be if interest rates rise or if tech stocks show a sharp slowdown in growth,” said Max Wasserman, co-founder and senior portfolio manager at Miramar Capital. “I’m cautious on this market because it’s dominated by a handful of names.”

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As a dividend-growth investor, Wasserman holds Microsoft Corp., Broadcom Inc., and Alphabet Inc., which collectively account for about 15% of his portfolio. While some of his other positions have underperformed, he’s balancing exposure with energy which he expects to gain from a weaker dollar and healthcare stocks.

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