Analysts Warn of S&P 500 Volatility Heading Into September

Market technicians and strategists are warning of potential volatility for the S&P 500 as it enters September, which has averaged a 0.8% loss over the last three decades. Analysts cite several risk factors, including the approach of November midterm elections and sentiment indicators from Ned Davis Research, Inc. that suggest excessive optimism among investors.

JPMorgan Chase & Co. warns that the correction in AI-linked stocks may not be over, noting that the Philadelphia Stock Exchange Semiconductor Index remains 22% below its peak following a breakdown in June. While some investors are rotating into the S&P 500 Equal-Weighted Index, technicians caution that this gauge also faces historical headwinds during midterm years.

Despite these risks, some strategists advise against aggressive risk shedding. They suggest that investors follow current trends using stop-loss strategies rather than attempting to predict a downturn. BTIG reports that the S&P 500 has stagnated for two months, describing current market movement as money shifting between sectors without creating overall growth.