"Markets often rally in anticipation of rate cuts but then decline when the actual rate cuts are implemented. J.P. Morgan's trading desk recently warned that despite stocks setting "more than 20 all-time highs this year," the Federal Reserve's next rate cut "threatens to curb investors' zeal" through a potential "sell the news" drop. The S&P 500 is up almost 33% from its lows in April and is up nearly 13% for 2025."
"One item that we have been examining, in addition to the seasonal data, which indicates that September is almost always the worst month for stocks, is the market-capitalization-to-gross-domestic-product ratio, a stock market indicator favored by Warren Buffett. Currently, the U.S. market cap-to-GDP ratio, commonly referred to as the Buffett Indicator, has reached an all-time high, surpassing 217% as of early September 2025, indicating significant market overvaluation according to historical interpretations of the metric."
Markets often rally in anticipation of rate cuts but decline when cuts are implemented, with J.P. Morgan warning that the Fed's next cut could trigger a 'sell the news' drop despite numerous all-time highs. The S&P 500 rose sharply from April lows and is up for 2025. Mutual funds commonly distribute realized capital gains in November and December, prompting prior selling and rebalancing. September is historically the weakest month for stocks. The U.S. market-cap-to-GDP (Buffett Indicator) surpassed 217% in early September 2025, signaling extreme valuation levels that increase correction risk. Screened opportunities include stable, dividend-paying names in defensive sectors.
Read at 24/7 Wall St.
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