It's All Down to the Next 14 Trading Sessions for the Stock Market

The coming weeks will determine whether the recent stock market rally keeps its momentum or loses steam.

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Investors are bracing for a wave of market-moving events: a jobs report, a critical inflation reading, and the Federal Reserve’s interest rate decision. All of this unfolds over the next 14 trading sessions, shaping sentiment as traders return from summer break. These updates arrive at a delicate moment: the S&P 500 Index just logged its weakest monthly gain since March and now enters September historically its toughest month.

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Meanwhile, volatility is virtually absent. The Cboe Volatility Index (VIX) has closed above the key 20 level only once since late June. The S&P 500 hasn’t endured a single 2% drop in 91 sessions, marking its longest calm stretch since July 2024. On August 28, the index hit yet another all-time high at 6,501.58 and is now up 9.8% for the year, rallying 30% from its April 8 low.

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“Investors are right to be cautious heading into September,” said Thomas Lee, head of research at Fundstrat Global Advisors. “The Fed is restarting a dovish rate-cutting cycle after a lengthy pause, which makes positioning a challenge.”

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Lee, a well-known market optimist, expects the S&P 500 to dip 5% to 10% this fall before rebounding to the 6,800–7,000 range by year-end.

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Lee isn’t alone in his near-term caution. Even Wall Street’s biggest bulls are uneasy that today’s low volatility could be a warning sign. Over the past 30 years, the S&P 500 has averaged a 0.7% loss in September, declining in four of the last five years, Bloomberg data shows.

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The action begins Friday with the monthly jobs report, a figure that took center stage in early August after the Bureau of Labor Statistics revised down nonfarm payrolls for May and June by nearly 260,000 jobs. That sparked a sharp response from President Donald Trump, who fired the agency’s chief, accusing her of political bias.

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Next, on September 9, the BLS will release its projected revision to the Current Employment Statistics survey, which could reshape job growth expectations.

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On September 11, all eyes turn to the consumer price index (CPI) for the latest inflation gauge. Then, on September 17, the Fed announces its policy decision and updated rate projections, followed by a press conference from Chair Jerome Powell. Investors are hoping Powell offers clues on the future path of interest rates.

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As of now, swaps markets price in about a 90% chance of a rate cut at this meeting.

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Just two days later comes “triple witching”  the simultaneous expiration of stock options, index futures, and other derivatives which typically injects volatility into markets.

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Despite the looming uncertainty, traders seem remarkably relaxed. Hedge funds and other large speculators are betting heavily against the VIX, shorting it at levels not seen in three years. Jobs day volatility is priced at just 85 basis points, signaling complacency, says Stuart Kaiser, Citigroup’s head of U.S. equity strategy.

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History suggests that such calm often precedes turbulence. In February, the S&P 500 peaked and volatility spiked amid tariff concerns from the Trump administration, blindsiding traders who had bet on sustained stability. Similarly, in July 2024, record VIX shorting set the stage for August’s global selloff triggered by the unwinding of the yen carry trade.

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While the VIX edged toward 16 last Friday, it remains 19% below its one-year average hardly an indication of fear.

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The rally isn’t without merit. The U.S. economy has held up well despite Trump’s tariffs, and corporate earnings growth remains solid. According to Bank of America, investor cash holdings are at a near-historic low of 3.9%, reflecting strong confidence in U.S. stocks.

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But high prices are creating anxiety. The S&P 500 now trades at 22 times forward earnings, a level only surpassed during the dot-com bubble and the early post-Covid tech boom.

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“We’re still buying big tech,” said Tatyana Bunich, president of Financial 1 Tax. “But valuations are stretched, so we’re keeping some cash ready for a meaningful pullback before adding more.”

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Even long-time bull Ed Yardeni is questioning whether the Fed will actually cut rates in September. Persistent inflation, he argues, could derail those expectations.

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“I think this rally will pause soon,” Yardeni said. “If CPI comes in hot and jobs are strong, traders may rethink rate cuts as a done deal. That could spark a brief selloff. But markets should recover once they realize the Fed can’t tighten much because the economy is still strong.”

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The next two weeks could redefine market sentiment. With key jobs, inflation, and Fed decisions on the horizon, plus historically tricky seasonality, investors should expect turbulence even if the long-term outlook stays bullish.

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